1997 PLP 69 (CLC)

Rules 225 of the Octroi Rules, 1964, is reproduced as under:‑‑ "225.‑‑(1) Notwithstanding anything contained in these rules, Municipal Committee may, with the prior approval of Government lease out by public auction for a period not exceeding one year, the collection of Octroi on such terms and conditions, not inconsistent with the provisions of this Chapter, ‑ as may be specified by Government. (2) The acceptance of any bid at an auction conducted under the provisions of sub‑rule (1) shall be subject to confirmation by the Controlling Authority. (3) The Municipal Committee shall, within seven days of the date of auction, submit the bid accepted at the auction to the Controlling Authority for its confirmation. (4) The Controlling Authority shall within thirty days after the bid has been submitted to it by the Municipal Committee for confirmation, either confirm the bid or declare that it withholds its confirmation to the bid, provided that if within the aforesaid period of thirty days the, Controlling Authority fails to do either of there things, it shall be ' deemed to have confirmed the bid. (5) Where the Controlling Authority within the period specified in sub‑rule (4) declares that it withholds its confirmation to that bid, the lease of the collection of Octroi shall subject to any direction that may be given by the Government in this behalf under sub‑rule (1) be again put to auction and the provisions of sub‑rules (2), (3) and (4) shall apply to such reauction. (6) The person whose bid has been accepted at the auction shall forthwith deposit with the officer conducting the auction a sum equal to one percentum of the amount of his bid, as security for the performance of his obligations in regard to the collection of octroi and payment of lease money to the Municipal Committee. The security deposit shall be forthwith refunded to the person making it if the Controlling Authority does not confirm his bid, and where it confirms the bid, the deposit shall be refunded to him after the period of which the collection of Octroi was leased to him is over and he has paid up all the dues of the Municipal Committee and has duly performed all his obligations in regard to the collection of Octroi. (7) In addition to the security deposit referred to in sub‑rule (6), the persons whose bid has been accepted and confirmed by the Controlling Authority (hereinafter referred to as the lessee) shall, within seven days of the such confirmation deposit with the Municipal Committee, one tenth of the amount of his bid, and the balance of the amount of his bid shall be paid by him to the Municipal Committee in equal monthly instalments at the close of the month for which the instalment is due. (8) If the lessee fails to pay the ten percentum deposit or any instalment within the time specified in sub‑rule (7), or charges Octroi at a higher rate than that prescribed in the Octroi Schedule for the Municipal Committee, or commits any breach of the provisions of these rules or any terms or conditions of the agreement which may .be entered into by, him with the Municipal Committee in regard to the lease of Octroi, the Municipal Committee may, without prejudice to any other action which it may be entitled to "take against the lessee under the law or these rules forfeit his security' deposit and forthwith cancel his lease." Rule 2 of the Lease Rules, 1990, reads as follows:‑‑ "

2. Lease of collection rights.‑‑A Local Council may lease out by public auction for a period not exceeding one year, the collection rights of tax, fee, rate, toll, cess or other charges levied by a Local Council.'' Similarly rule 4 of Lease Rules is reproduced in full.‑‑ "

4. Procedure of auction.‑‑(1) For the conduct of an auction a public notice in not less than one daily newspaper and at least seven days before the date fixed for auction shall by given by the Local Council. ' (2) The notice shall contain the date of the meeting of the Local Council to be held for considering the acceptance of bids made in an auction: ' Provided that if the said meeting is not held for any reason then the meeting shall be held within seven days of the date of the auction: Provided further that the first auction for the relevant year shall be held at least two months before the start of the financial year and no subsequent attempts, if any, shall be made after fifteen days from the first attempt. (3) No lease shall be granted through negotiation, persuasion or any method other than open auction unless two attempts of auction have been made. (4) In the‑ meeting of the house, the Local Council may either accept a bid or reject the same. (5) Where the Local Council rejects a bid the lease shall again be put to auction and the provisions of these Rules shall apply to such re auction."

9. The controversy whether this matter should be determined on the touchstone of the Octroi Rules only because they being special, will override the Lease Rules; 1990, does not present much difficulty, inasmuch as, on the touchstone of both these rules the impugned order cannot be sustained. The scheme of the Octroi Rules is that the Local Councils and the committees/corporations will, themselves collect the Octroi Tax. The only exception is created in rule 225 of the Octroi Rules` and this enables the Local Council to grant lease rights through public auction and only after prior approval from the Government. If, therefore, the impugned order is tested on the touchstone of the Octroi Rules, the same has to be declared as completely without any backing in law. .

10. Coming to the Lease Rules, it will be seen that rule 2 permits a Local Council to lease out the collection rights by public auction for a period not exceeding one year. Rule 4(3) of the same is most relevant and also important.. It opens with a prohibition and says that no lease shall be granted through negotiation, persuasion or any other method other than open auction unless two attempts of auction have been made: Apart from the fact that in its memo of proceedings described as " Ferde Nelam" noted above, the Auction Sub- Committee recommended reauction on 30‑7‑1996, if it is found that two attempts of auction have not been made, then the grant .of the contract on the letter of the Administrator by the Government will have to be declared as illegal. As noted, the first auction was held on 5‑5‑1996, but the contractor ran away, leaving the Corporation enriched by a few million of forfeited amount. Auction was then held on 14‑7‑1996 in which petitioner's bid of 10,01,00,000 was the highest. Somehow this was not approved and thereafter auction was scheduled on 30‑7‑1996. In my opinion; the auction held on 5‑5‑1996 and 14‑7‑1996 cannot be said to be "attempts of auction". Instead these are completed auctions although in pursuance thereto a formal agreement could not be entered into by the highest bidder and the Corporation, for one reason or the other. The attempt to auction on 30‑7‑1996 is the first one because according to the respondents' own version, nobody except M/s. Allahwala Corporation, appeared to deposit the security amount or to participate in the bidding and even M/s. Allahwala Corporation refused to give an offer. This will, therefore, have to be described as the attempt to auction which in any case did not mature. That is why the auction Sub‑Committee recommended fresh auction.

11. It has not been disclosed as to why the Administrator chose to disregard the recommendation of the Auction Sub‑Committee and what compelled him to make out a case of award of contract in favour of respondent No.4 and forward it to the Government. It is at this juncture that the doubts and surreptitiousness starts creeping in. This is the petitioner's claim that the petitioner and other bidders were informed on 30‑7‑1996 that auction will not take place and will be rescheduled and duly notified. According to the petitioner, it was a mere cover to ward off other bidders and to make out a case for grant of contract to respondent No.4 at a lower amount. On the present record, while it is difficult to give a positive finding in favour of the petitioner on this issue, it is equally difficult to give a clean chit to respondents Nos.3 and

4. As noted above, there is not a word in the letter of Administrator dated 31‑7‑1996 forwarding the case of respondent No.4 to the Government as to why the recommendation of Sub‑Committee for fresh auction is not accepted. In fact it seems it has not been noted in the letter that the Auction Sub- Committee has made any such recommendation. This ought to have been brought to the notice. of the Government when the case for grant of contract through private negotiations was being forwarded to the Government. To my mind this deliberate omission adversely reflects upon the bona fides, of respondents Nos.3 and

4. However, since the fate of this case can be decided on other grounds, no further comments need be made on this aspect of the case.

12. It is, therefore, held that before grant of contract to respondent No.4, the mandate/pre‑condition laid down in rule 4(3) of the Lease Rules regarding making of two attempts at auction has not been fulfilled and in terms of section 39(2) of the Ordinance, this contract is not binding on the Local Council. The language of rule 4(3) shows that the command is mandatory.

13. Mr. M. Mohy‑ud‑Din Qazi has heavily relied on a reported judgnient in Javaid Iqbal Abbasi & Company v. Province of Punjab and 6 others (1.996 SCMR 1433), and according to the learned counsel, the Supreme Court of Pakistan approved the judgment of this Court in almost similar situation and have made observations which are helpful in protecting the public interest in such a situation. The judgment in fact is highly illuminating and apart from the questions of law it does show the extent to which this Court can go for protecting the interest of the public exchequer and for examining the vires of the impugned action on the touchstone of reasonableness, fairness and public interest. I respectfully bow to the ratio of the judgment as well as the observations made therein.

14. Malik Saeed Hassan, Advocate, failed to substantiate the plea of non- maintainability of the petition on the ground of availability of alternative remedy. Since the order dated 5‑8‑1996 in this case has been passed by respondents Nos. l and 2, Malik Saeed Hassan has failed to show as to whom the appeal against the order of the Secretary, Local Government Board, lies under the Punjab Local Councils (Appeals) Rules, 1980. In the circumstances, there is no merit in the preliminary objection and the same was disallowed during the course of hearing and is hereby repelled.

15. For the reasons noted above, I accept this petition with costs to be paid by respondents Nos.3 and 4 and declare that the impugned order/approval dated 5‑8‑1996 and the consequential agreement dated 7‑8‑1996 is without lawful authority and as such of no legal effect: Respondent No.5 is hereby directed to hold the fresh auction in accordance with law wherein the reserved price will be Rs.10,00,00.000 (ten crores) for eleven months and, if no better offer is received, to award the contract to the petitioner and, in case the petitioner does not take the contract, the amount of Rs.50,00,000 already deposited by him will be forfeited. The three call deposits in favour of the Administrator, Municipal Corporation, Sialkot, for the total amount of rupees fifty lacs have been received in Court from the learned counsel for the petitioner and after retaining photocopies of the same on record, the originals have been delivered to Mr. Yawar Ali Khan, the learned Additional Advocate‑General, Punjab, for' onward transmission to respondent No.3. A.A./N‑28/L Petition accepted.