P L D 2005 Lahore 728 (PLP)

UMAR ATA BANDIAL, J.

The petitioner participated in an auction of attractive vehicle registration numbers conducted by the respondent No.3, Director Excise and Taxation, Government of Punjab on 14-4-2005. The petitioner gave the highest bid for motor registration No."LZO-I" in the amount of Rs. 1,50,

000. According to the advertised terms of auction previously published in the newspaper, the bid amount ` was subject to immediate deposit; and this was done by the petitioner. Four days later the impugned order dated 18-4-2005 by the respondent No.1 , Secretary Excise and Taxation. Government of Punjab informed that the auction bid of the petitioner for Registration No.LZO-I along with bids for several other registration numbers had been declined approval by the "Administrative Department". No reasons for such refusal is given in the said order.

2. Learned counsel for the petitioner submitted that despite being the highest bidder in the auction and having deposited the full amount of his bid with the respondent No.3, the petitioner stood deprived of the auctioned motor registration number that he has desired immensely without disclosure of any reasons. The impugned order has accordingly been challenged before this Court on several grounds including inconsistency of the impugned action with past practice, violation of notified auction terms and incompetence/illegality of cancellation of the auction after recovery of full price.

3. In defence the respondents have relied upon one of the terms of the auction duly advertised in the newspaper. This condition allows the competent Authority to cancel the auction without assigning any reasons. The written comments of the respondents disclose that the auction had not been approved by the competent authority and thereby cancelled because the highest bid by the petitioner was less than the bids received for the same number of the last four series. The record shows that in the three out of four bids received immediately prior to the last approved bid relied by the respondents, they accepted bids that were lower than previous bids. Thus, after the motor registration "LZL-1" was auctioned at Rs.4,00,000 on 31-1-2005, two subsequent bids for "LZM-1" and "LZN-I" were accepted although each was successively lower than the previous bid. Therefore the ground taken by the respondents, is not borne out from the record. As the aforesaid power to cancel the auction is vested in a public authority, it was contended for the petitioner that the same can be exercised only upon reasonable grounds. Learned counsel for the petitioner referred to the approved bids for the same number of earlier series in auctions held on 25-11-2004, 27-9-2004 and 15-9-2004 when the highest bid of Rs.1,00,000 had been accepted on each of the three occasions by the respondents. A perusal of the list of approved auction prices shows an inconsistent pattern in the approval of the highest bid. As already noticed, the level of previously approved prices has also not been a criterion to affirm the highest bids received in subsequent auctions.

4. In the foregoing scenario, this Court has looked for the legal criterion upon which the respondents can be said to be exercising their discretion in the matter of approving auction bids for motor registration numbers. Circular letter by the respondent No.1 bearing SO (Excise) XIII-20-91-LP-11(P), dated 29-5-2003 sets out the respondents auction policy. This policy is amended by another circular bearing the same number and dated 27-6-2003 which incorporates for the present purpose the following test: "Administrative Department's approval of the auction proceedings/sealed bids would be required as per previous practice. " The foregoing amendment vaguely refers to "previous practice" as a ground for approving auction bids. This policy, however, does not make factors like revenue consideration or spares/participation by bidders in the auction or price fixation amongst the bidders to be considerations for canceling an auction although each of these may be a valid criterion. The important point is that cancellation of auction by a public authority cannot be at whim but with reference to relevant criteria that is set out in the terms of the auction. In the present context, the reserve price fixed for the registration number under auction can be an effective check on under-bidding. In the instant case, however, the reserve price fixed by the auction policy was at very low level of Rs. 10,

000. As a result, each time a highest bid is rejected as in the present case by the respondents, that bidder has cause to be doubtful and disappointed because there is no notified criterion to guide the respondents' action and also because their past record is inconsistent for accepting from time to time bids that are lower than previous bids.

5. It is apparent that in the case of the petitioner the respondents applied a criterion of valuation that it chose not to apply in the immediate preceding cases. Although the impugned action by the respondents is laudable for trying to improve revenue generation, it is however, inconsistent with their past practice. Inconsistency is a tendency that encourages arbitrariness. The fact that a public authority may in its discretion act one way or the other in respect of similar cases as has happened in the present case owing to the lack of settled criteria characterizes such action to be unreasonable.

6. Apart from the foregoing deficiency in the regulation of approval of auctions conducted by the respondents, there is another important aspect of this case that deserves attention. The engagement of a public authority in the activity of holding public auction involves the exercise of a commercial function. The commercial activity presently being undertaken by the respondents is the sale of a licence which is type of public property, to private persons. In such cases of sale, the superior Courts have laid down the additional requirement of transparency as being an active consideration for the scrutiny and evaluation of such proceedings. Referring to the Constitutional rights of a citizen entering upon any lawful profession or occupation and to conduct any lawful trade, the Hon'ble Supreme Court in the case of Obaid Ullah and another v. Habib Ullah and others PLD 1997 SC 835 observed that the right of citizen to compete and participate to seek a post in Government on the basis of open competition, as presently in the case of auction, is a "right he cannot exercise unless the process of appointment is transparent, fair and just and free from any complaint as to its transparency and fairness". The requirement of transparency in a auction is no less and can be accomplished primarily when clear terms of the auction sale are set out and duly notified to interested parties. This shall in essence establish predictability of the fate of the auction in the hands of a public authority. This is particularly important in the commercial activities of' the State because it lends commercial credibility to the action of a public authority. If it is perceived that the public authority is at liberty to act inconsistently and arbitrarily then genuine parties would be discouraged to participate because manipulation may be perceived to have a chance to sway the decision.

7. Although the impugned action taken in this matter appears to be based on a relevant consideration, however, its non-mention in the respondents auction policy and -their failure to justify it on the basis of past practice as a criterion of action sets down a vague and fluid standard that undermines credibility and transparency. It is, therefore, directed that the respondents Nos. 1, 2 and 3 should re-visit and revise their auction policy and to incorporate therein relevant, practicable and reasonable criteria that would operate to enhance the transparency, fairness and reasonableness of the auctions conducted by them. The specification of such criteria is for the respondents to decide themselves. In the present case, during the course of hearing of the petition, auction of subsequent series took place on 2-5-2005 in which the Registration No.LZP-1 was auctioned at a price of Rs.1,80,

000. This Court gave the petitioner an option to raise his bid to that amount as a condition of interim relief which the petitioner availed. Subsequently at the stage of final hearing the learned counsel for the parties expressed satisfaction with that arrangement. In consequence whereof this petition has borne fruit. It is allowed subject to the payment by the petitioner of enhanced price of Rs.1,80,000 for vehicle Registration No.LZO-1 as reflected in the consent recorded by the learned counsel for the parties. M.B.A./M-1325/L Order accordingly.