JAMUNA CONSTRUCTION CO Vs. STATE OF U P

JUDGEMENT

(1.) S. H. A. Raza, J. Fate of these writ petitions hinges on the reply to the question as to whether after inviting the tenders, the State Government has a right to cancel it and entrust the work to any instrumentality of the State, which did not submit its tenders.

(2.) BEFORE dealing with the question posed in the foregoing paragraph, the fac tual matrix in short compass needs to be enuniciated. On 10-1-1996, the State Govt. invited the tenders in sealed cover to grant contract for the construction of lining work in Sharda Sahayak Project from amongst the Rajkiya Nirman Nigam, Rajkiya Setu Nigam and enlisted Contractors of the Ir rigation Department. The last date for the submission and the opening of the tenders was 2-3-1996. Petitioners submitted their tenders, prior to that date but they were not informed as to whether their tenders were rejected or accepted. But, they learnt from certain sources that the State Government was taking steps to enter into the contract with Rajkiya Nirman Nigam. Thereafter, the petitioners who submitted their tenders, filed the present writ petitions on the ground that although the State Govern ment could have adopted a policy different from inviting the tenders but when it had taken recourse to invite the tenders, then it is incumbent upon the State Government to abide by the result of the tenders and cannot arbitrarily and capaciously negotiate with any agency or the agencies, who even did not submit their tenders. It was also urged that the petitioners being the approved contrac tors of the Irrigation Department of the State of U. P. had the legitimate expectation, that the Contract would be given only to the approved Contractors, but, the State Government acted arbitrarily, unfairly and unjustly, by taking a decision to enter into the negotiation with Rajkiya Nirman Nigam, which had no experience for the lining work in the Canal without giving opportunity to the petitioners to participate into the negotatiation.

(3.) THE relevant facts pertaining to the controversy as set out in the counter-af fidavit is, that the Chambal Dal Irrigation Scheme is situate in Bah Tfehsil of District Agra. THE said scheme was drawn by the State Government. THE work of the Canal was to be completed in four phases. In the first phase of the scheme, 26. 4 meters water was to be lifted. In the second phase 31. 1 meters water has to be lifted. It is for the purposes of providing irrigation facilities to 62000 hactare of land. THE said Canal is seventy meters long as Principal Canal and the Head Discharge is about 450 cubic. THE expected cost for the work which was to be done as per estimated rates of the year, 1995, was around of Rs. 4694 Lacs. Till 20-2-1996, 2254 Lacs have already been spent on the said Canal by the State Government. THE rest of the work has to be completed till 31-1-1997 from the amount which has been received from NABARD. In the said scheme permanent (Pakka) work which still remains to be completed is as under:- 1. Second Phase pump house Rs. 112. 00 Lacs. 2. Second Phase Exporting structure near the delivery pipe line of the Pump House Rs. 040. 00 Lacs. 3. Delivery Tank of the Pump House in the 2nd Phase Rs. 012. 00 Lacs. 4. Remaining work of 22nd number of Principal Canal Rs. 150. 00 Lacs. 6. On 1-3-1996, Mr. Rashid Moin, Joint Secretary Irrigation, Government of U. P, addressed a letter to the Managing Director, U. P. Rajkiya Nirman Nigam, Setu Nigam, Priyojna and Nalkoop Nigam, Luck-now, to attend the meeting on 6-3-1996 under the Chairmanship of the Principal Secretary, Irrigation, Government of U. P. , Lucknow. A report was called for from the Chief Engineer, Parikalp and Viniyojan, to submit a report. On 2-3- 1996, Chief Engineer submitted a report pertaining to the work which has to be done in the said Canal, to the Government. A copy of this letter was also addressed to the Managing Director, U. P. Rajkiya Nirman Nigam, Managing Director, Setu Nigam and the Managing Director, Pariyojna and Nalkoop Nigam Ltd. , Lucknow. 7. According to the said report, the tenders were invited with regard to the items mentioned at serial Nos. 1 and 3 men tioned in the foregoing paragraph, upon which no decision was then taken. As far as item N. 2 is concerned, tenders were also invited, which had not been received till then. As far as item No. 4, no tender till then was invited. It was mentioned in the report that the work has to be completed till 31-3-1997, through U. P. Rajkiya Nirman Nigam, Rajkiya Setu Nigam and Pariyojna and Nalkoop on priority basis. So that, not only the work is to be completed within the aforesaid period, but qualitatively, better result be obtained. It was further mentioned in the said report that although for the work to be carried out as mentioned OK item Nos. 1 and 3, tenders have been received, but it would be cancelled after the decision by the State Government. As far as, item No. 2 is concerned, notice for inviting tenders can be cancelled. Regarding item No. 4 tor the remaining work of 22 number in the Prin cipal Canal, it was mentioned that it has to be completed in the main and principal canal. THE drawing for the same have been pioposed. THE drawing proposed regarding the work on item Nos. 2, 3 and 4 would be available by 15-4-1996 for approval. 8. On 6-3-1996, the'meeting was held under the Chairmanship of the Principal Secretary, Irrigation Department, U. P. Lucknow for carrying out of the aforesaid work. Besides him, nine other officers of the various department participated into the meeting. 9. In the said meeting, a decision was taken that as far as the work pertaining to the Chambai Dal Canal is concerned, the work should be entrusted to Rajkiya Setu Nigam (Bridge Corporation), regarding the Charkhari Pump Canal, under Modha Damp Scheme, a decision was taken that it should be entrusted to Rajkiya Nirman Nigam. As far as the work of lining in the Sharda Sahayak Scheme, a decision was taken in the said meeting that the entire work should be divided into three parts and the work should be entrusted to the aforementioned three Corporations, for which NABARD has sanctioned 25 crores, Out of which 5 crores have already been spent. For the work which has to be carried out from the said amount i. e. 20 crores, tenders have been invited for fourteen crores, which are one or two percentage higher than the estimated cost. THE said meeting resolved that in case, aforementioned Corporations agree to complete the work on the agreeable proposed cost, teken the work be aiiotted to the Corporations. THE Corporations will intimate their accep tance forthwith to the Chief Engineer. Meeting further resolved that the aforesaid work shall he carried out under the direc tions of the State Government as well as in accordance with the Government. In case, Government orders would require relaxa tion, then such proposal be immediately referred to the State Government. 10. From the perusal of the aforesaid policy decision, which was taken by the State Government, it is evident that there were three main consideration before the State Government for entrusting the work of the Corporations. Firstly, that the entire work should be completed within 31-3-1997, secondly, to achieve quantitative working, which the State Government thought that only the Corporations would be able to per form and thirdly, that the State Govern ment shall have complete supervision and control over the work. 11. THE main question, which has cropped up dusting the course of the argu ment is, as to whether the State Govern ment after inviting the tenders and opening the same can resile from its earlier policy and instead of entrusting the work to the highest bidder, who is on the approved list of the irrgetion Department, e'ntrust the work to the Public Corporations. 12. Mr. S. M. K. Chaudhari, relying on the precedent of Hon'ble Supreme Court in Sri. Harminder Singh v. Union of India and. others, AIR 1986 SC1527, submitted that it is true that the Government may enter into the contract with any person of Corporations, but in doing so, the State Government or the instrumentality of the Statc. Government, cannot act arbitrarily. 13. In Ramanna Daya Ram Shetty v. International Airport Authority of India: AIR 1979 SC1678, it was observed: "where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas, or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with standard and norms which is not arbitrary, irrational or irrelevant. THE power of discretion of the Govern ment in the matter of grant of largess must be confirmed and structured by rational relevant and non-discriminatory standard or norms and if the Government departs from such standard or norms in any particular case or cases, the action of the Government would be liable to be struck down unless it can be shown by the Government that the departure was not arbitrary but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. " 14. In Harminder Singh (supra), Sri Harmindar was the lowest bidder to supply the milk. Rates given by him in the tender for the supply of milk was lowest and the tender of respondeat-4 was for a different item, not contemplated by the notice. But, however, the tender of respondent-4 was accepted and the tender of Harminder Singh was rejected, although it was lower than the respondent No. 4. 15. In the present case, there exists no dispute between the tenderers. If the Government would have giver, the contract to a private tenderer, whose tender would have been higher, then any of the person whose tender would have been lowest, could have very well, on the basis of the irrational and arbitrary action of the Government, challenged the action of the State Govern ment also beside the other grounds of un-justness, unfairness or mala fide. But, in the present case, instead of accepting any tender of the private individual, the State Govern ment, after inviting and opening the tenders, reversed its policy by not getting the work done through the private contrac tors and preferred to entrust the work to the public corporations, hence the ratio of Har minder Singh (supra) is not applicable to the facts of the present case. 16. THE decision of the State Government, according to which it has decided to entrust the work to the Public Corporations, has to be judged on the touch-stone of Wednesbury's principle, which is embodied in Article 14 of the Constitution itself; meaning thereby that the decision of a public authority will be liable to be quashed or otherwise dealt with by ar appropriate order in judicial review proceedings where the Court concludes that the decision is such that ro authority properly directing itself on the relevant law and acting reasonably could have reached it. [as sociated Provincial Picture Houses Ltd. , v. Wednesbury Cot portion, as per Lord Greene, M. P. (1948, 1 KB 223]. 17. In Erusian Equipment and Chemicals Ltd. v. Slats of West Bengal (1975) 1 SCC70, Hon'ble Supreme Court observed in para 17 of the report; "when the Government is trading with the public, 'the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transaction'. THE ac tivities of the Government have a public element and, therefore, there should be fairness and equahty THE State need not enter into any con tract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure. " 18. THE same view was taken in Food Corporation of India v. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71; wherein Hon'ble Supreme Court observed: "in contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. THEre is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fair play in action'. 19. But, in the matter of award of con tract by the Government, to any other per son, it was held in Sterling Computers Limited v. M and N Publications Ltd. (1993) 1 SCC 445. "it is not possible for Courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come put with a plea that it is not always possible to act like a quasi-judicial authority while awarding contracts. Under some special cir cumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purposes of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the Courts, such decision are upheld on the principle laid down by Justice Holmes; that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of 'play in the joints' to the executive. 20. In Tata Cellular v. Union of India (1994) 6 Supreme Court Cases 651; Hon'ble Justice S. Mohan, J. speaking on behalf of the Bench deduced the following principle in the matter of judicial review pertaining to such administrative action; (1 ). THE modern trend points to judicial restraint in administrative action. (2 ). THE Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. (3 ). THE Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4 ). THE term of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tdkder or award the contract is reached by process of negotiations thorugh several tiers. More often than not, such decisions are made qualitatively by experts. (5 ). THE Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (includ ing its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6 ). Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 21. In Para 76, relying upon the obser vations of Lord Donaldson, M. R. in R. V Panel on Take-overs and Mergers, Exp in Guinness Pic, Mr. Justice S. Mohan, speak ing for the Bench in Tata Cellular, observed: "the judicial review has been supervisory or longstop' Jurisdiction. Unless that restriction on the power of the Court is observed, the Court will, under the guise of preventing the abuse of power, be itself guilty of usurping power. " 22. It was further observed in para 77 of the report that the duty of the Court is to confine itself to the question of legality. Its concern should be: (1 ). Whether a decision-making authority exceeded its powers? (2 ). Committed an error of law. (3 ). Committed a breach of the rules of natural justice. (4 ). Reached a decision which no reasonable tribunal would have reached, or (5 ). Abused its powers. It was further indicated: "therefore, it is not for the Court to deter mine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. THE extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:- (i ). Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii ). Irrationality, namely, Wednesbury un reasonableness. (iii ). Procedural impropriety. 23. THE true test in setting at nought any administrative action is that the Court has to consider as to whether, the authority, in exercise of obligation imposed upon him, acted fairly, candidly, bona fide and reasonably or not. And, if the Court comes to the conclusion that the administrative authority has passed the order with prejudi cial mind or capriciously with a bias mind wraped by resentment and personal dislike, only then the Court will intervene. 24. In New Horizons Limited and Another v. Union of India and others, (1995) 1 SCC 478; Hon'ble Supreme Court ob served; that "while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the, Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. It is, how ever, recognised that certain measure of 'free play in the joints', is necessary for an administrative body functioning in administrative sphere. " 25. In Delhi Science Forum and others v. Union of India and another, (1996) 2 SCC 405; Hon'ble Mr. Justice N. P. Singh speak ing for the Bench, laid down the following principles pertaining to the scope of judicial review in the matter of giving contract etc. : (i ). that the decision has been taken in bad faith, (ii ). decision is based on irrational or irrelevant considerations; (iii ). decision has been taken without following the prescribed procedure which is imperative in nature. "but, it has also to be found that the proce dure adopted for such grant was reasonable, ra tional and in conformity with the conditions which had been announced. Statutory authorities have sometimes used their discretionary power to con fer social or economic benefits on a particular section or group of community. THE plea raised is that the Act vests power in them to be exercised as they 'think fit'. This is a misconception. Such provisions while vesting powers in authorities in cluding the Central Government also enjoin a fiduciary duty to act with due restraint, to avoid misplaced philanthropy or ideology. " It was further indicated: "it cannot be exercised in a manner which can be held to be unlawful and which is now known in administrative law as Wednesbury principle, stated in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation. THE aforesaid principle is attracted where it is shown that an authority exercising the discretion has taken a decision which is devoid of any plausible justifica tion and any authority having reasonable persons could not have taken the said decision. " It was further indicated; "many administrative decisions including decisions relating to awarding of contracts are vested in a statutory authority, or a body con stituted under an administrative order. Any decision, taken by such authority or a body can be questioned primarily on the grounds, (i) decision has been taken in bad faith, (ii) decision is based on irrational or irrelevant considerations; (iii) decision has been taken without following the prescribed procedure, which is imperative in na ture. 26. Dealing with the burden of proof, in proving that the action was taken in bad faith and it was based on irrational and irrelevant consideration, it was observed: "it is well settled that the onus to demonstrate that such decision has been vitiated because of adopting a procedure not sanctioned by law, or because of bad faith or taking into consideration factors which are irrelevant, is on the person who questions the validity thereof. This onus is not discharged only by raising a doubt in the mind of the Court, but by satisfying the Court that the authority or the body which had been vested with the power to take decision, has adopted a procedure which does not satisfy the test of Article 14 of the Constitution or which is against the provisions of the Statute in question or has acted with oblique motive or has failed in its function to examine each claim on its own merit on relevant consideration". 27. As far as the power of judicial review is concerned, Hon'ble Supreme Court for the guidance of all the Courts in India, issued a note of caution in the follow ing words; "but, at the same time all decisions which are to be taken by an authority vested with such power cannot be tested and examined by the Court. THE situation is all the more difficult so far as the commercial contracts are concerned. Par liament has adopted and resolved a national policy towards liberalisation and opening of the national gates for foreign investors. THE question of award ing licences and contracts does not depend merely on the competitive rates offered; several factors have to be taken into consideration by an expert body which is more familiar with the intricacies of that particular trade. While granting licences a statutory authority or the body so constituted should have latitude to select the best offers on terms and conditions to the prescribed taking into account the economic and social interest of the nation. Unless any party aggrieved satisfies the Court that the ultimate decision in respect of the selection has been vitiated, normally Courts should bereluctant to interfere with the same. " 28. It is well settled, that the contract does not come into existence only when the tenders are invited. If, in pursuance of a notice to interested persons to submit their tenders, the tenders are submitted, the only requirement of law is that the every offer is considered on the principle of fair play, which is embedded in Article 14 of the Con stitution. Mere offer of the tender, does not create any contractual obligation between the parties, hence no person who has made an offer can stake his right before the Court of law for awardng of the contract. But, certainly if the process in taking the decision suffers from bad faith and is based on irra tional or irrelevant consideration and the decision has been arrived at, without follow ing the prescribed procedure, any person aggrieved can demand the review of such an order 29. Every person or citizen, has a legitimate expectation from the Slate to take a decision bonafide and such decision should be based on valid and rational consideration in accordance with the prescribed procedure. 30. In Food Corporation of India v. Mis Kamdhenu Cattlefeed Industries, (1993) 1 SCC 712; in para 8 of the report, Hon'ble Supreme Court observed; "merely reasonable or legitimate expecta tion of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary and this how the requirement of due consideration of a letitimate expectation forms part of the principle of nonarbitrariness, a necessary concomitment of the rule of law. Every legitimate expectation is a relevant factor requir ing due consideration in a fair decision-making process. 31. THEory of legitimate expectation, which is a part of principle of non -arbitrari ness imprinted in Article 14 itself, required due consideration in a fair decision-making process. THE theory of legitimate expecta tion will not apply, if the policy which had aroused legitimate expectation, itself, has been revised, altered or amended by the Stale. But, if does not mean that the revised policy would not be tested on the scale of Article 14 of the Constitution. If the policy is not just, fair or suffers from discrimina tion, arbitrariness, irrationality and bad faith or violative of principle of natural jus tice, the arms of the Court are long enough to check the administrative authority, but in doing so, relevant and paramount con sideration before the Court would be the public interest. If the policy serves the larger public interest and is not hit by bad faith, irrelevant consideration, unjustness and un fairness, the Court will shake off its hands. 32. In the present case, the State Government after inviting the tenders thought it appropriate to change its policy by entrusting the work to public corpora tions for the purposes of accountability, as the Government has the power to supervise and issue the directions to such Corpora tions. THE completion of the work is in public interest as it affects large section of rural population who are dependent on agriculture. THE work is to be completed within a limited period and it must start before the monsoon sets in. Due to lining of the Canai erosion of the scil would be curbed and because of concrete and ce mented lining the water would flow smooth ly into the agricultural fields. THE State Government, on the basis of the advise given by nine officers of the various depart ment, thought that the qualitatively, the work to be carried on by U. P. Rajkiya Nirman Nigam, would be much better, in com parison of the private contractors, hence the Government reversed to its earlier policy and decided to entrust the work to the Cor porations. 33. THE discretion of determining, the skill, ability learning, capacity and suitability to" carry out the work is to be juaged by the State Government, but the conduct of the State Government in exer cise of fulfilling its obligation ought to be fair, candid and unprejudiced; not arbitrary capricious or biased; much less, wraped by resentment, or personal dislike. THE power of the Court, in such matter, is not to sit over as an appellate authority against such action of the State, but it is mainly concerned to see as to whether the State has contravened any Saw which the Constitution obligate to State to adhere asd follow. But, in doing so, the Court will not review the policy of the State Government, It cannot substitute its own policy. THE only area of intervention is limited io the extent to judge, as to whether the policy adopted is m the public interest, just, fair and reasonable or not. No doubt, in the matters of contract, State atleast should have latitude to select such an offer which fulfil the public interest. Unless the sciection of the person to carry out the work in accordance with the contract is vitiated, the Court would be reluctant to interfere into such matters. THE Officers who under the Chairmanship of Chief Secretary, as sembled on 6-3-1996, having sufficient ex pertise in such matters, considering the ur gency with regard to completion of the lining of the Canal, within a specific period, resolved to, that instead of a private con tractors the work should be entrusted to public corporations for the purposes of bet ter qualitative work and accountability. This Court, cannot, sit as an appellate authority over the said decision and substitute its own finding by indicating that such a work can be better carried out by private contractor. 34. Sri S. M. K. Chaudhari, with all vehemence at his command, submitted that the right of the petitioner under Article 19 (1) (b), have been infringed. Being the enlisted contractor of the Irrigation depart ment and after having invited to offer their tenders, which they did, the State Govern ment cannot resile from that policy and award the contract to a Corporation, mean ing thereby that the action of the State Government is discriminatory, arbitrary and unjust. THE argument appears to be misconceived. 35. In Mis. International Data Manage ment Ltd. and others v. State of U. P and others (W. P. No. 996 of 1991) decided on 2-5-1991. Similar question cropped up before a Bench of this Court consisting of Hon'ble Mr. Justice B. P. Jeevan Reddy, Chief Justice (as he then was) and Hon'ble Mr. Justice K. Narayan, wherein the validity of a letter dated 30-11-90 written by the Secretary to the Government of U. P, addressed to all Heads of the Government Department, Public Corporations and other Local Bodies was assailed by means of which departmental heads were directed to obtain electronic goods specified in the said letter from M/s. Uptron (India) Ltd. , alone, which is a company incorporated under the Com panies Act owned and controlled by the Government of U. P. and engaged in manufacturing of electronic goods. THE writ petition was dismissed for the reason that the decision did not prohibit the petitioners or other manufacturers of electronic goods from carrying out manufacturing and busi ness operation in the State of Uttar Pradesh. It did not prohibit any one not even the departments of the Government, Public Corporations and Local authorities under its control from purchasing the electronic goods manufactured by the petitioners or other manufacturers, as only the electronic goods specified in the said letter was to be purchased. THE Court was of the view that the fundamental rights of the petitioner to carry out the profession, has not been infr inged, in any manner. 36. In the present case, petitioners' fundamental right have been least affected. Neither they have been black-listed nor they have been prohibited from performing any work, in the Irrigation department, nor in any other department and public corpora tion. Only a specified particular work m the Irrigation department was entrusted to the public Corporations, hence it cannot be said that their rights to carry on profession or business has been affected. 37. As far as the contention of the petitioner that the action of the State Government suffers from mala fide, is con cerned, it has no basis, as there is no whisper much less, in the allegation of mala fide against the departmental heads and en gineers who met under the Chairmanship of Chief Secretary and resolved that the con tract be given to Rajkiya Nirman Nigam. No pleading regarding any undue favour to the Nigam or that the officers were in any way prejudicial to the petitioners or they have acted on the dictate of any higher authorities abdicating their function, have been asserted. Hence, it cannot be said that the State Government while exercising its discretion has taken a decision, which is devoid of any plausible justification and any reasonable authority or reasonable person could have not taken such a decision. After testing the decision of the State Govern ment on the scale of Article 14 of the Con stitution of India and Wednesbury prin ciple, we are of the view that the decision taken does not suffer from bad faith or ir relevant consideration. Writ petitions are devoid of merit and are accordingly dis missed. Interim order, if any, stands vacated. Petitions dismissed. .