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Petitioner: M/S ABDULLAH & COMPANY & Other VS Respondent: GOVT: OF SINDHH And 2 Other
Court Name: Sindh High Court Judge(s): Nasir Aslam Zahid, Imam Ali G. Kazi Title: M/S ABDULLAH & COMPANY & Other vs GOVT: OF SINDHH And 2 Other Case No.: C.P. No. D-793 & D-797 of 1991 Date of Judgment:1991-02-06 Reported As: K.L.R. 1992 Civil Cases 382 Result: N/A
JUDGMENT
JUDGMENT NASIR A. ZAHID, J.- This judgment will govern Constitutional-Petitions No. D-793 and D-797 of 1991. In Petition No. 793/91, petitioner is Zahid Hussain Shah represented by M/s Sharaf Faridi and Abbas Ali, Advocates. Respondent No. 1 in this petition is Government of Sindh represented by Mr. Abdul Ghafoor Mangi, Assistant Advocate-General and Respondent No. 2 Union Council Darsano Channo by Mr. Gulab M. Rang, advocate. Respondents No. 3 and No. 4 are Karachi Trading Company and Baloch Enterprises respectively, both partnership firms, and represented by Mr. A A. Fazeel, Advocate. 2. In Petition No. 797 of 1991, Abdullah & Company, a partnership firm, is the petitioner represented by M/s. Ghulam Hussain Abbasi and Abbas Ali, Advocates. Respondent No. 1 is the Province of Sind represented by Mr. A.G. Mangi, Assistant Advocate-General, respondent No. 2 Union Council Darsano Channo by Mr. Gulab M. Rang and Miss. Saeeda Bilqees and respondent No. 3 Karachi Trading Company, a partnership firm, represented by Mr A A. Fazeel, Advocate. 2. Petitioner, Zahid Hussain Shah (in Petition No. 793/91) claims to be the Octroi Collection Contractor of respondent No. 2, Union Council (hereinafter referred to as "the Union Council") for the year which ended on 30.6.1991, for which year the contract was awarded with the approval of the Government of Sind to the petitioner against highest bid of Rs. 74, 50,000/- made in open public
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auction. According to the petitioner, the contract for the year ending 30.6.1991 awarded to the petitioner was for collection of octroi on the goods imported within the octroi limits of the Union Council but the goods imported by Pakistan Steel Mills, Port Qasim, KESC, Bin Qasim Thermal Power Station, Pak Land Cement Factory and Abu Dhabi Palace were exempted from the payment of octroi. Rice Export Corporation, which, according to the petitioner, is the main source of collection of octroi for the Union Council, were liable for payment of octroi. Rice Export Corporation had been disputing the levy of octroi on the goods imported by them within the octroi limits of the Union Council and, sometimes in July, 1990, the said Corporation filed a suit in this Court being Suit No. 658 of 1990 in which the said Corporation challenged the said levy and obtained an ad-interim injunction. According to petitioner Zahid Hussain Shah, on account of the said injunction, petitioner was unable to collect octroi to the extent of about rupees two million and, in the circumstances, the petitioner approached the Provincial Government through his letter dated 7.4.1991 for rebate to the extent of the amount of octroi recoverable from the Rice Export Corporation and to exempt him from payment of the last two instalments of the contract amount. In the alternative, he requested the Government that his contract may be extended for another year i.e. From July, 1991, to June, 1992, to save the petitioner from the huge financial loss suffered by him on account of not being able to collect octroi on the goods imported by the Rice Export Corporation. The Additional Secretary, Local Government, asked for comments of the Chairman of the Union Council. The Chairman of the Union Council, by letter dated 5.5.1991 addressed to the Additional Secretary, informed that the Union Council was unanimous in its recommendation for the grant of contract to the petitioner for the current year i.e. From 1.7.1991 to 30.6.1992 with 15% increase i.e. For Rs. 85,67,500/-. However, no action was taken by the Union Council for grant of the contract for current year 1991-92 to the petitioner and the petitioner paid the last and final instalment of Rs. 7,45,000/- on 24.4.1991 and, according to the petitioner, this payment was made under protest by the petitioner, reserving his right to take suitable action for refund of the amount recoverable from the Rice Export Corporation of Pakistan on account of octroi payable for the previous year i.e. 1990-91. The Union Council got a public auction notice issued in the newspapers of 25.5.1991 notifying that auction in respect of the following four contracts for the year 1991-92 would take place on 4.6.1991 and in case the auction could not be held on 4.6.1991, it would take place on 9.6.1991 and 13.6.1991:- (a) Octroi Tax-KESC Unit No. 1,2, 3,4 & 5, Thermal Power Station, Bin Qasim (Government reserve price Rs. 2,79,16,000/-) (b) Octroi Tax and parking fee. (Reserve price Rs. 85,68,000/- (c) Octroi tax Pak Land Cement Factory. (Reserve price Rs. 24,81,200/-) (d) Toll Tax from National Highway to Super Highway. (Reserve price Rs. 11,48,000/-). According to the petitioner, public auction was not held by the Union Council on 4.6.1991 and 9.6.1991 and, in the meantime, petitioner was making different representations to the Government not to hold the auction and requested for re-grant/extension of the period of the petitioner's contract for the year 1991-92. The auction scheduled for 13.6.1991 did not take place as it was postponed on the. Direction of the Government to the Union Council and the Union Council was asked to fix a fresh date of auction. According to the petitioner, the representations of the petitioner remained pending and on the other hand in daily Jang of 23.6.1991 an auction was again published by the Union Council notifying that the said public auction would now be held on 27.6.1991 at 11 a.m.
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In the office of the Chairman of the Union Council. According to the petitioner, the auction scheduled for 27.6.1991, as notified by the public auction notice published in the daily Jang of 23.6.1991, was not held and, prior to the scheduled date of 27.6.1991, the first contract mentioned in the auction notice was awarded for Rs. 1,90,00,000/-, against the reserve price t)f Rs. 2,79,16,000/-, to respondent No. 4 (Baloch Enterprises) by negotiation while the second contract was awarded to respondent No. 3 (Karachi Trading Company) for Rs. 93,00,000/- also by negotiation. According to the petitioner, the award of the two contracts in favour of the respondents No. 3&4 through private negotiations was done in a clandestine and dubious manner and with mala fide intention as well as on account of undue influence. It is alleged that the two firms belong to one Bhagwan-das Chawla, a member of the National Assembly, who had approached the Sind Government and the Union Council. It is further alleged that the award of the contracts was also illegal. It has been pleaded that neither the Government nor the Union Council could award the said two contracts in question to respondents No. 3&4 through private negotiations without undergoing the process of public auction as required under the octroi rules. According to the- petitioner, he had got prepared two pay orders both dated 26.6.1991 and 27.6.1991 for Rs. 9,42,480/- and Rs. 30,70,760/- respectively in favour of the Chairman of the Union Council being 11% of the reserved price of the two contracts bearing No. 1 & 2 in the auction notice in order to participate in the auction scheduled for Rs. 27.6.1991, which auction admittedly never took place. It is alleged by the petitioner that he, alongwith other persons, had gone to the place of auction i.e. The office of the Chairman of the Union Council where the Chairman reached at about l2 noon, but when he presented the said two pay orders to the Chairman of the Union Council, the Chairman returned the same informing that the two contracts had already by awarded through private negotiations to respondents No. 3&4 and accordingly no public auction was held. 3. In Petition No. 797/91, the petitioner (a partnership firm) refers to the public auction notice in daily Jang dated 25.5.1991 for leasing out the right to collect octroi by open public auction for the year 1991-92. According to the petitioner, their firm got itself registered with the Union Council before the auction, as required under the rules, and paid Rs. 1,000/- and obtained a receipt for the same. It is alleged that the public auction for 4.6.1991 was postponed without any reason and as such the auction was got shifted to 9.6.1991 and on this date also the auction was postponed without any reason and the date of the auction again automatically shifted to 13.6.1991 which date was also fixed in the public auction notice. One day before the auction i.e. On 12.6.1991, the Sindh Government directed the Union Council to postpone the auction and fix a fresh date for auction but no reason for the postponement was given. Auction, therefore, did not take place on 13.6.1991. Then a second notice was published in the daily Jang of 23.6.1991 fixing 27.6.1991 for holding the public auction. According to the petitioner, when they reached the office of the Chairman of the Union Council on 27.6.1991, the Chairman of the Union Council informed them that there would be no auction as on 25.6.1991, that is two days earlier than the schedule auction date, the Government had directly granted the contract for octroi tax and parking fee to respondent No. 3 for a sum of Rs. 93,00,000/-. According to the petitioner, the entire exercise of awarding the contract to respondent No. 3 (Karachi Trading Company) which normally should have taken about 37 days was completed within 3 days i.e. Between 25th & 28th June, 1991. It is averred that the award of the contract to respondent No. 3 was mala fide and also illegal. Emphasis was laid on the extraordinary haste and manner in which the whole exercise of grant of contract was completed so that no time would be left to challenge the award, the contract period starting on 1.7.1991. It was pointed out that this exercise was completed within three days despite the fact that the distance between the offices of
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the Government and the Union Council is about 35 miles. According to the petitioners, if the contract had been awarded on the basis of open public auction, it would have brought to the Government and the Union Council at least Rs. 1h Crores for the said contract whereas the contract was granted to respondent No. 3 for a sum of Rs. 93.00.000/- only and as soon as the petitioners came to know on 27.6.1991 (the date on which the auction was supposed to have been held), they offered to pay Rs. 1h Crores for the contract for the year 1991-92 and deposited a Pay Order for rupees 1h lacs by way of security deposit with the Government and obtained a receipt. 4. In petition No. 793/91 filed by Zahid Hussain Shah, comments were filed by the Government of Sindh as well as by the Union Council. Separate counter-affidavits have also been filed by Karachi Trading Company (respondent No. 3) and Baloch Enterprises (respondent No. 4). An affidavit in reply was then filed by the petitioner dealing with the comments and th counter-affidavits. In the comments filed by Chairman on behalf of the Union Council, it is averred that petitioner Zahid Hussain Shah is not an "aggrieved person" and has, therefore, no locus standi to file the petition. It has been submitted that no person made any offer in the auctions held on 4.6.1991 and 9.6.1991 and as such the' Union Council thought it feasible to give leases through negotiations as the Union Council did not have adequate staff to collect octroi itself and that the Government also appeared to have realised this and in consequence directed the Union Council not to hold the auction on 13.6.1991. According to the comments, petitioner himself did not want the auction to take place and had filed a suit inter alia praying for stay of the auction. Award of contracts to respondents No. 3 and 4 through negotiations has not been denied. In the comments filed by the Government of Sindh, it is stated that in Constitutional Petition No. D- 75 of 1983 filed by the Rice Export Corporation of Pakistan, which was decided on 21.12.1989, it was observed by this Court that the Corporation was exempt from payment of octroi if they were exclusively dealing in goods belonging to the Government and the representation of petitioner Zahid Hussain Shah for revision/rebate was rejected by the Department on 11.6.1991. It is averred that on 4.6.1991 and 9.6.1991 no party, including the petitioner, gave any bid and the auction scheduled for 13.6.1991 was postponed due to administrative reasons and the auction was postponed to 27.6.1991 but due to failure of auction proceedings on two occasions the Government considered it fruitless to conduct further auction and, therefore, the offers of respondents No. 3&4 were accepted. Petitioner's locus standi to file the petition has been challenged. It has further been pleaded as follows:- "It may be pointed out that the Council with the approval of the Government is competent to award contracts under section 45(4) of the Sindh Local Government Ordinance, 1979 without inviting offers in auction. The Council in exercise of its legitimate powers has awarded contracts to Respondents No. 3&4 through negotiation keeping the experience of two auctions where no party offered any bid." In the counter-affidavits filed on behalf of respondents No. 3&4, reference is made to the first two scheduled dates of auction (4.6.1991 and 9.6.1991) when no bid was made and then the postponement of the auction scheduled for 13.6.1991. It has been averred that, in the circumstances, the Union Council was justified in awarding the contracts to respondent Nos. 3&4 through private negotiation. In para 10 of the petition it is
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averred as follows:- 10. That it now transpires that respondent No. 3 and Respondent No. 4, which both concerns belong to and are owned by one Bhagwan Das Chawwalla, MNA, approached Respondents No. 1 & 2 for the-award of 2 contracts bearing No. 1 and 2, as published in annexure 'E', without undergoing the process of public auction as required under the application octroi rules and maneuvered to get the award of the said 2 contracts No. 1 & 2 in' their favour. The first contract was awarded for Rs. 1,90,00,000/- against the reserve price of Rs. 2,79,16,000/- to"Respondent No.4 while the second contract was awarded to Respondent No. 3 for Rs. 93,00,000/-. In the conter-affidavit on behalf of respondent No. 4 (Baloch Enterprises), the award of contract to them is admitted. Allegation about respondent No. 4 firm belonging to MNA Bhagwan Das has not been denied but what is stated in reply is as follows: - "It is denied that grant of the contract was made due to influence of Bhagwan Das MNA." Identical reply is given in the counter-affidavit respondent No. 3 (Karachi Trading Company) to the above allegation in para 10 of the petition. 5. In Petition No. D-797/91 filed by Abdullah and Co., also comments have been filed by the Sindh Government and the Union Council. Similar stands have been taken as in the comments filed in Petition No. D-793/91. As in connection with the allegation of mala-fides made by the petitioner the great haste in which the contracts were awarded had been highlighted, it is considered appropriate to refer to the reply given by the Government in their comments. The following paragraphs in the comments being relevant in this regard are reproduced:- "7. Contents of para No. 7 are not denied. The Petitioner got registered with respondent No. 2 on 9.6.1991. 8 & 9. It is submitted that auction was held on 4.6.1991 but nobody got registered as a prospective bidder for auction and none, offered any bid. The auction was postponed to 9.6.1991. The - petitioners got themselves registered with respondent No. 2 for participation in the auction but none of them offered any bid. The auction was again fixed for 13.6.1991 but due to certain administrative reasons it was postponed with the direction to respondent No. 2 to fix a fresh date. 10. Contents of para No. 10 are not denied. It is submitted that the respondent No. 2 simultaneously was looking for the lessee who could have it through negotiation. The auction twice had failed and there was no hope of successful auction on 27.6.1991. The octroi lease of previous year 1990-1991 was to expire on 30.6.1991 therefore, the Respondent No. 2 could not risk waiting upto 27.6.1991 and reject the offer of Rs. 93,00,000/- received from Respondent Rs. 3 by respondent No. 2 through respondent No. 1 on 17.6.1991. 11. The offer of 93,00,000/- received from respondent No. 3 was forwarded to respondent No. 2 for comments. The respondent No. 2 placed the offer before the Council on 18.6.1991 and the Council approved the offer of Rs. 93,00,000/- under their resolution No. 4 dated 18.6.1991 and recommended to the Government lor confirmation. The Government, after due consideration, confirmed the offer on 25.6.1991 in the interest of the Council.
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12. Contents of para No. l2 as presented by the petitioner are denied. The time was running fast as the lessee had to enter into agreement before 30.6.1991. The situation required prompt action. Zahid Hussain Shah who is petitioner in Petition No. 793/91 pending in this Honourable Court tried to continue possession by the hook or by crook after the expiry of his octroi lease on 30.6.1991 and for the purpose had filed Suit No. 889/91 in the Civil Court also. Emergency of situation required urgent treatment of the case and immediate action." From their pleadings, it follows that the case of the petitioners in these two petitions is that the award of the contracts to Karachi Trading Company and Baluch Enterprises through direct negotiations is illegal being violative of the applicable provisions of the Sindh Local Government Ordinance, 1979, and the rules framed and directions issued thereunder, and that the award of the contracts is also null an devoid being malafide. The official as well as private respondents have contested the case of the petitioners on both counts. Before dealing with the aforesaid contentions of the petitioners, we may refer to the preliminary objections raised by the respondents about the competency of the petitioners to invoke the constitutional jurisdiction of the High Court under Article 199 of the Constitution. One objection is that petitioners are not "aggrieved persons" and as such not competent to maintain these constitutional petitions. We find no merit in this objection. Petitioner Abdullah & Co. In Petition No. 797/91 had got themselves registered for taking part in the auction. It is also admitted by the respondents that petitioners in both petitions were present at least on 9-6-1991 (the second date of auction) for the auction. Admittedly, petitioner Zahid Hussain Shah in Petition No. 793/93 was the contractor of the Union Council for collections of octroi for the previous year 1990-1991 and was making all efforts to get the contract for the current year 1991- 1992. 'On these admitted facts, the petitioners had sufficient interest in the award of contracts in question to fall within the meaning of "aggrieved persons". 6. The relevant provision of the Sindh Local Government Ordinance, 1979, is Section 45 which was amended recently during the pendency of these petitions by the Sindh Local Government (Second Amendment) Ordinance No. X of 1991 promulgated on 12.8.1991. Section 45 before its amendment by the aforesaid Second Amendment Ordinance read as follows:- (4) All contracts of transfer by grant, sale, mortgage, lease or otherwise of immovable property or any interest and right thereto or disposal or sale of movable property 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." The Second Amendment Ordinance contains only three sections which read as follows:- Short title and commencement. 1. (1) This Ordinance may be called the Sindh Local Government (Second Amendment) Ordinance, 1991.
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(2) .It shall Amendment of Section 45 of Sindh Ordinance XII of 1979. 2. In the Sindh Local Government Ordinance, 1979, in section 45, in sub-section (4), after the words "movable property" the words "or for leasing out rights to collect taxes" shall be added. Validation of contracts. 3. Any contract leasing out rights to collect taxes entered into or executed by any council on or after 1st January, 1991 without inviting offers in auction shall, notwithstanding any rule, instruction or directive to the contrary, be deemed to have been validly entered into or executed." From a perusal of the Second Amendment Ordinance, 1991, it follows that the amendment in the Sindh Local Government Ordinance, 1979 has been made effective from 1.1.1991 and, by section 3 of the said Amendment Ordinance, it has been provided that any contract leasing out right to collect taxes made by any council on or after 1.1.1991 without inviting offers in auction shall notwithstanding any rule, instruction or directive to the contrary, be deemed to have been validly made. Chapter XXX of the West Pakistan Municipal Committees Octroi Rules, 1964, which are still in force, contain rules about the leases of octroi. For the purpose of these petitions, the relevant rule is 225 which is also reproduced here:- "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 its confirmation. (4) The Controlling Authority shall, within thirty days alter 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 these 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 the 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 persons 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 regards to the collection of octroi and payment of lease money to the Municipal Committee. The security deposit shall be forthwith refunded to the person
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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 for 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 person whose bid has been accepted and confirmed by the Controlling Authority (hereinafter referred to as the lessee) shall, within seven days of 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 instillments (at the close of every 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." In…
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