1992 PLP 2396 (CLC)

it is only due to Mr. Bhagwandas MNA s contacts, with the defendant No.2 that defendant No.2 ordered in favour of Soofan Das.......it will not be out of place to mention here that entire transaction of award of contract to defendant No.3 by defendant No.2 was completed on one date i.e. 8‑7‑1992. On 3‑6‑1992 on the date of auction Mr. Bhagwandas Chawla also came in the auction in car ...........having a plate of MNA. To prove that Mr. Ghulam Jilani and Soofan Das have business relationship with Mr. Bhagwandas, MNA the office address of these two are material I have acted in accordance with the resolutions of the council. Lengthy arguments from all sides have been heard on the application for grant of interim relief. Learned counsel for the plaintiff has contended that the plaintiff has be en granted the contract in the suit in the best public interest, that the chairman of the defendant No.4‑council, who alone could have, under the rules, executed the disposition has done so, that the contract dated 8‑7‑1992 executed under the orders of the defendant No.2 is bad because a secretary of the council even if competently appointed could not execute such a contract so as to bind the council and above all in awarding the contract to the defendant No.3 neither the plaintiff nor the council has been heard nor even the plaintiff's contract has been cancelled, the Council Resolution authorizing plaintiffs contract remaining intact to date. Mr. K.M. Nadeern AA.‑G, representing the defendants Nos. I and 2, has urged that such defendants have acted to safeguard the best interests of the State and there is no illegality in any thing that the defendants have done. Mr. Abdul Hafeez Pirzada for the defendant No.3 has maintained that the contract in favour of the plaintiff is a void transaction, concluded fraudulently and did not require to be cancelled and the defendant No.3 who was a genuine participant in the auction has rightly been accorded the contract, having never reailsed from his auction bid and never even taken away his initial deposit, such deposits of the two highest bidders having been forfeited upon default that of the third high bidder remaining with the council and all the rest, including the plaintiff having withdrawn the same following upon failure in the auction. Further, the learned counsel has urged that a plaintiff must succeed on the strength of his own case and not on account of any supposed infirmity in the defence. According to the learned counsel irrespective of merits in the controversy this is not a case fit for confirmation of the ad interim injunction. The defendant No.5, Ghulain Jilani, the third highest bidder, who has appeared in person seems to be following a wait and watch policy . The defendant No.6, who is the fourth highest bidder. and has instituted Constitutional Petition No.D‑17.34/92, has submitted a statement, appending a ' true copy of such memo. of petition and indicating that he is willing to abide with his bid recorded in the auction. His recorded bid is obviously higher than that of Soofan Das or Zahid Hussain Shah, the plaintiff. In fact, it is higher than Soofan Das and Zahid Hussain Shah taken together. Ghulam Jilani the defendant No.5, had bettered all of them at the auction, through what he stands for now is shrouded in uncertainty. The highest‑and the second highest bidders have failed, though the second highest bidder with a very substantial bid of Rs.5,50,00,000, were the matter to be re‑opened, could yet be considered, if interested and found genuine. Before proceeding in the matter it will be useful to reproduce here the following provisions in sections 45, 53 and 54 of the Local Self‑Government Ordinance, 1979 under which the defendants Nos. 1, 2 and 4 shall be deemed to have acted in the grant of a contract of the nature involved in this suit:‑ 45."Contracts. (1) ............... (2) ................. (3) .................. (4) All contracts for transfer by grant, sale, mortgage, lease or otherwise of immovable property or any interest and right thereto or disposal or sale of movable property (or for leasing out rights to collect taxes) shall, subject to the rules be entered into after inviting offers in an open auction: Provided that if the highest bid is not accepted by the council, approval in writing of Government shall be obtained, and Government shall, in its order give reasons for not accepting the highest bid: Provided further that a council may with the approval of Government enter into a contract without inviting offers in auction. (5) ............................................................. (6) Government may subject to the other provisions of this Ordinance, make rules laying down the procedure to regulate the making of contracts and the execution thereof. (7) No contract executed otherwise than in conformity with the provisions of this Ordinance shall be binding on the council." 53 (1) "Supervision over Councils (2) .............................................. (3) If, in the opinion of Government, anything done or intended to be done by or on behalf of a council is not in conformity with the law, Government may by order‑‑ (a) quash the proceedings; (b) suspend the execution of any resolution passed or order made by the council; (c) prohibit the doing of anything proposed to be done; and. (d) require the council to take such action as may be specified. (4) Where an order under subsection (2) or subsection (3) is made by Government, the council concerned may, within thirty days of the receipt of the order, represent against it in the prescribed manner, and the order made on such representation shall be final.

54. Power of Government to Give Direction to Councils‑‑ (1) Government may direct any council, or any person or authority responsible thereto to take within such period as may be specified such action as may be necessary for carrying out the purposes of this Ordinance. (2) Where after due enquiry or otherwise Government is satisfied that any direction made under subsection (1) has not been complied with, it may appoint a person or persons to give effect to such direction, and may further direct that the expenses incurred in connection therewith shall be charge on the local fund and borne by the council." In the first place, it is obvious that the octroi contract involved in these proceeding is to be concluded in furtherance of an open auction alone. In the event of a regular public auction there appears to be no requirement of any confirmation from the Government, if the highest bid is accepted. However, on 5-51992 the Government of Sindh is shown to have a policy document requiring the submission of all auction papers before the formal award of any contract. It would appear that in the unfortunate state of thing , which prevails in the local bodies, Government could lawfully call for auction papers to ensure that no fraud or other malpractice was involved in the auction proceeding and remains be the highest bid, if any, was a genuine one, catering to public interest. If not, the Government could act in terms of section 45,53 and 54 of the ordinance and recall the auction, ordering either a fresh one or an action in terms of the second proviso to section 54(4) requiring a negotiated contract, conducive to public interest. If however, the highest bid received at an auction satisfied the requirement of law and justice the Government would be expected not to interest and no confirmation from it would be required in allowing the concerned local body to proceed with formalisation of the contract. All times, the Government and the councils are to act within the parameters of their respective authorities none transgressing the sphere of the other. Now it is an admitted position that the defendant No. 4-council did not submit the auction papers to the Government for its scrutiny as required in the laid down policy and in default of highest bid proceeded to accord a negotiated contract without paying any heed to the Government policy which at least in broad outlines could not be considered to be contrary to law. To the same effect defendant No.4-council did not even advert to the letter of the third highest bidder (Ghulam Jilani defendant No.5) dated 22-6-1992 wherein that bidder had shown his willingness to take the contract. In fact and on the contrary it proceeded to allocate the contract to the plantiff. Irrespective of such offer and even if it be assumed that the letter of the third highest bidder dated 22-6-1992 may have been received subsequent to the Council meeting held at 11-30 a.m. on that date there was no reason why another meeting on the next day or thereafter could not be called to examine the merits in such letter. Here it remains to be clarified that whereas the highest bidder in a lawfully held auction has a right and a local body can proceed to process the connected contract with him once the Government has found the auction to be in order without even the approval of the Government (section 45(4) first proviso of the Ordinance) any resort to the other bidders, lower in line and a contract with any of them would not be a contract concluded pursuant to the holding of auction. It would be a negotiated contract beyond the ambit of the auction, like any other and could only be concluded in terms of the second proviso to section 45 (4) above and there the power rests with the Government alone. However, in its policy document dated 5-5-1992 the Government speaking broadly, in the event of failure of an auction, apparently, in furtherance of section 45(4), second proviso, has authorised also a negotiated contract but that would always be subject to confirmation in terms of the first proviso to section 45(4) in the Ordinance. It is thus obvious that unless the defendant No.1‑GoveTnment was to accord its confirmation in line with the two provisos in section 45(4) no contract other than with the highest bidder could be concluded by the council. To this extent whatever transpired in the meeting of the council of the 22nd of June, 1992 could be of little legal effect and that being so the contract with the plaintiff would be a void transaction as contemplated by section 45(7) of the Ordinance read with sections 2(g) and 23 of the Contract Act, last of which are as below‑ "

2. Interpretation Clause.‑‑In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:‑‑ (a) ============== (b)

(c) .................................... (d) .................................... (e) ‑‑‑ ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ ‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑ (g) an agreement not enforceable by law is said to be void

23. What considerations and objects are lawful and what not.‑‑The consideration or object of an agreement is lawful, unless‑‑it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent ; or involves or implies injury to the person or property of another; or the Court regards it as immmoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be lawful. Every agreement of which the object or consideration is unlawful is void. .................................................................... ....................................... For the same reasons a resolution of a local body in contravention of law could be void. Neither may call for a formal rescission. Here reference may be made section 3 of the Sindh Local Government. (Second Amendment) Act, 1991, on which plaintiff places reliance. It is in these terms:‑‑ S. 3 "Validation of Contract. Any contract leasing out rights to collect taxes entered into or executed by any council on or after Ist January, 1991 without inviting offers in auction, shall not withstanding any rule, instruction or direction to the contrary, be deemed to have been validly entered into or executed." It is contended by Mr. Faridi that the aforequoted provision is calculated to cure all defects in contracts concluded otherwise than through due open auctions. The argument appears to be incorrect. Section 3 in the Ordinance follows upon an amendment of section 45(4) in the 1979 Ordinance wherewith Octroi contracts have been introduced in the subsection requiring open auctions (within brackets in the above‑quoted provision) and it is such negotiated contracts before the amendment which alone are calculated to be saved through section 3 of the amending statute. This becomes dearer when it is seen that the validation is of contracts concluded on or after January 1, 1991, the date on which the Act is deemed to have come into force. Placing the plaintiff's case on the point at the highest level and assuming also that. all contracts to collect taxes otherwise than through auctions were calculated to be saved nothing more can be achieved beyond a validation up to the date of the promulgation of the enactment (February 15, 1992) since no amendment to such effect has been incorporated in the parent Ordinance of 1979 and plaintiff's contract admittedly is of June, 1992, and cannot be saved merely by dint of the amendment. This brings us to the contract dated 8‑7‑1992 executed in favour of the defendant No.3. It has been contended by Mr. Sharaf Faridi that the Government of Sindh had no power to conclude the relevant contract on its own, as it seems to have done pursuant to the above reproduced letter dated 7‑7‑1992. Such letter dated 7‑7‑1992 is open to serious objection. Mala fides have been alleged and bias is imputed as factors antecedent to its issuance. These are also issues in the case and all that need be said on the subject is that such a possibility cannot be ruled out. Even so, what the defendants Nos. 1 and 2 seem to have been doing at the juncture of issuance of letter dated 7‑7‑1992 was to overstep the auction proceedings (which had already stood aborted with the highest bidder not showing up) and to opt for a negotiated contract, in other words an action in terms of the second proviso to section 45(4) of the Ordinance. Even this could be done only by the local council but subject to Government approval and subsequent confirmation. For that purpose, all avenues such as the prospect of other unsuccessful bidders, many of whom had better offers to their credit than the defendant No.3, had to be considered. This was not done. Why it was not done, the plaintiff vehemently contends is a question answer to which is to be found in allegedly deep‑rooted malice. For our purposes all. that need be said at that stage, is that this was wrong. If there were other people available for resort, at the very least, the matter should have been examined and better prospects should have been considered. This again obviously was not done. Besides, the procedure which was adopted in the grant of contract to the defendant No3 has left much to be desired. More than that, at this stage, I would not say. Further, contrary to the rules the contract with the defendant No.3 has been concluded by the Secretary of the Council, appointed in the manner aforementioned. Such a contract under the rules could be executed, only by the Chairman of the Council. For the same reasoning, which has been applied to the contract of the plaintiff, the contract of the defendant No.3 may be equally bad. What is more, it has also been questioned in the suit. All the foregoing, however, are tentative observations in the context of the concept of prima facie case and would not bind anybody upon trial of the action. At the same time, on the documentary material, which has been placed on the record, and I cannot see as to how on evidence any better case at law may be made out, the contracts of the plaintiff and the defendant,No.3 should be equally bad. None conforms to the requirements of law. None can be enforced. Section 56(f) of the Specific Relief Act, 1877 intervenes here. No permanent Injunction can be issued to prevent the breach of a contract specific Performance of which would not be enforced. Where a permanent Injunction cannot issue a temporary injunction cannot issue either. For a prima facie case to subsist there should be, an arguable case. That need not be an open and shut case. It would suffice if therein are posed substantial questions of law and fact which can be decided either way. Nothing that the plaintiff or the defendant No.3 may show on trial can validate ex facie illegal contracts which have no apparent sanction at law. There is thus, no prima facie case to go to trial. This leaves the question as to how the matter is to be addressed at this stage and this level. Plaintiff, as seen, does not have a prima facie case. At the same time, if injunction is refused the necessary result could, be that the defendant No.3 may have been inducted in the area as the octroi contractor, something to which he also prima facie does not appear to be entitled. The learned Judges of the Division Bench who heard Constitutional Petition No.D 1437/1992 on 5‑8‑1992 have taken care of this situation and have rightly ordered that in the event plaintiff fails in obtaining confirmation of the interim injunction here the possession of the contract would go to the council and not to the defendant No.3. They have, however, in view of the pendency of the suit here thought it fit not to regulate the immediate future of the contract itself. This, therefore, is something which subject to the decision in the petition, can be looked into in these proceedings. In matters of this category, it is to be noted that ad interim injunctions should not normally issue. In the first place, no irreparable loss is involved in such matters, the loss if any reparable terms of money. For grant of an interim injunction all the ingredients of prima facie case, balance of convenience and irreparable loss must subsist and subsist together. Manifestly, no irreparable loss arises in these matters. Then what has further to be seen is that the object of grant of a temporary injunction is calculated to protect and preserve the corpus in the suit and not to assign the corpus or to improperly. perpetuate it in specific hands during the pendency of the suit. Clearly the contract is only of a year's duration. An interim injunction during the ‑ pendency of the suit is likely to last longer. Grant of injunction in such a case would amount to decreeing in the suit before it has proceeded to trial. All this is impermissible. What then, in the circumstances of the ' case, is to be done so as to ensure, protection to public revenue and justice and fair play to all. In a proceeding purportedly under Order 39 of the Code, arguably, an attachment before judgment can be ordered or if required even a receiver can be appointed, citation of a specific provision and even a specific prayer being no bar. On the same analogy, if there is no other adequate provision in the Code, section 151, C.P.C. can be taken resort to and inherent powers can be exercised. It has been observed, that no one out of the public functionaries is anxious for another auction. In fact, the defendant No.4‑Union Council has been shown to be dead‑set in trifling extremely attractive bids and is ‑likely to repeat its performance, if a fresh auction were to be, on the cards. This unfortunately is a malaise with which public functionaries in this country are currently beset. Corrective process is to be applied wherever permissible. On the other hand, the Government of Sindh has itself opted for a negotiated contract. Further, another auction should entail time. Over a month of the contractual period has already gone by. Every effort, therefore, has to be made to ensure maximum public revenue and minimum loss of valuable time. In such circumstances, acting under the inherent powers of the Court, the only right thing to do would‑be, subject to the rights in the suit and the decision in the referred Constitutional petition, to direct the defendants Nos.1, 2 and 4 to sit together with the erstwhile auction‑bidders, minus the failed auction purchaser but ‑including the plaintiff, the defendants, Nos. 3, 5 and 6 or any outsiders, interested in the contract, and to pass on the contract on the best available terms in the most competitive manner possible. The benefits which the defendant No.4‑Council may thus come to enjoy would be subject to rights in this suit, the above petition and in any other proceedings that an aggrieved party may have instituted or may hereafter initiate. Failing this course, within the shortest possible time a re‑auction should be held but that, if necessitated, would be under the control and direction of the Official Assignee. Till such time as due contract is concluded, subject to the rights as above, the council would scrupulously 'observe compliance of the interim orders in the Constitutional petition under reference. In these terms, the ad interim injunction is vacated and the application under Order 39, Rules I and 2, C.P.C. stands disposed of. AA/Z‑187/K Order accordingly.