BHARAT CONSTRUCTION COMPANY Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) THE present writ petition has been filed by the petitioner alleging that his rejection at the stage when the respondents were to judge the pre -qualification is not proper. The respondents considered the applications of the prospective tenderers at the pre -qualification stage. At that stage, tenderers were judged departmentally. The interested parties were not given any opportunity to establish their claims before the authority which decided the fate of those who deserved consideration.

(2.) ACCORDING to the learned Counsel for the petitioner this is in gross violation of the principles of natural justice. Any decision making process which is in violation of the principles of natural justice is to be depricated. He draws support for his contention on the basis of a decision of this Court reported in 1991 (2) WLC 361 (Shree Mahalaxmi Mingrate Marketing Service Private Limited v. The State of Rajasthan and Ors.) and has placed reliance on the paras 34, 35 and 36 which reads as under: 34. In the present case it is apparent from the perusal of the fact which has come on record that the respondent Federation had entered into negotiation and discussion for many months be for deciding to appoint the petitioner as Selling Agent of its various products. A committee of 3 Senior Officers of the Federation had negotiated terms and conditions with the petitioner Company. After due consideration of different factors and especially the interest of the Federation, the Committee made recommendation for appointment of the petitioner as Selling Agent. Board of Directors of the Federation also considered the matter in detail and thereafter approved the appointment of the petitioner as Selling Agent for the products of the Federation. For atleast 6 months the petitioner was given to understand that his offer has been accepted and he was being appointed as Selling Agent. The petitioner was directed to establish infrastructure for starting the work for the last week of June, 1990. It was asked to go ahead for making suitable arrangements for that purpose. Thereafter the letter of intent was issued to the petitioner on 1.6.1990. The petitioner had undertaken market survey, prepared marketing plan, established its office and took steps for appointment of distributors and engaging of staff. In the process the petitioner had incurred a lot of expenditure. Neither in the letter dated 1.6.1990 nor in any other communication sent to the petitioner, there was a stipulation that in case of failure of the petitioner to sign the agreement or to furnish bank guarantee or any other document, it intended to cancel the letter of intent. The notings of the Managing Director on 29.6.1990 and 30.6.1990 clearly indicate that the Hon'ble Minister of State for Dairy Development had asked the Federation not to take further action without his instructions. This is also corroborated by the statement made by the respondent No. 4 on the floor of the Legislative Assembly on 16.7.1990. The note recorded by the Managing Director on 29.6.1990 is very crucial. It clearly records the Dairy Minister has desired that no further action in the matter till the Government does not clear the case. Obviously, therefore, the plea of the respondent Federation that the petitioner had not signed the agreement on 12.6.1990 or any other date thereafter, cannot be accepted as correct. The sudden change stance of the Federation on 15.7.1990 is inexplicable. No reason is borne out from the reply of the Federation or from the record which has been placed for the perusal of the Court. There has been no application of mind on the considerations relating to the interest of the Federation or the public interest. There is re - examined the question of appointing the petitioner as Selling Agent and after a scrutiny of the matter had come to the conclusion that it would be contrary to public interest to finalise the agreement with the petitioner and therefore, it should be cancelled. On 16.7.1990 Hon'ble Minister for State Dairy Development had categorically stated on the floor of the Legislative Assembly that the action of the Federation in taking decision to appointment the petitioner as Selling Agent was perfectly in order. There was no political interference. No favouritism had been shown to the petitioner. However, in hot haste the authorities of the Federation took drastic action of cancellation of the letter of intent to the petitioner. In the absence of any material having been Wplaced on record the sudden decision of the Federation on the night of 16.7.1990 and total lack of application of mind on the considerations of public interest or the interse of Federation, it must be concluded that the two elements which must necessarily be found in every State action namely lack of arbitrariness and the action being in public interest are totally missing in the present case. It is true that in every case reasons are not to be communicated to the party concerned but the requirement of fairness is implicit in every State action and reasons must be borne out from the record. Arbitrariness is writ large in the fact of the action taken by the Federation by way, cancellation the letter of intent through telegram. It is true that an elements of discretion vests with the Federation in such matters but the arbitrariness in the exercise in order to promote the object interest and not mere whims or caprice of individuals. Further persons which is invested with such power must bear in mind that the power is to be exercised fairly, reasonable and justly. The total absence of application of mind in the present case is clear proof of arbitrariness in the action of the Federation. 35. It is true that mere issuance of letter of intent may not be equated with a case where contract has been concluded between the parties but nonetheless on imperfect or incholate right had been conferred on the petitioner. The peculiar facts of this case show that even before issuance of the letter of intent the petitioner had been asked to go ahead to prepare itself to start the work. The petitioner was made to part away with the substantial money in order to facilitate starting the marketing of the products. As already noticed, the letter of intent did not contain a stipulation that in case of failure of the petitioner to sign the agreement and to furnish bank guarantee, the Federation was going to cancel the letter of intent and to give it an opportunity of explanation or representation against the proposed action. The minimum requirement of principles of natural justice namely principle of audi alterum partem should have been followed looking to the facts of this case. Admittedly, there has been a non -compliance of this requirement of the principal of natural justice. Therefore, decision of the Federation to revoke letter of intent by telegraphic communication is liable to be declared as void. 36. I also find considerable force in the arguments of Shri B.S. Sharma, learned Counsel for the petitioner that the reasons given for cancellation of the letter of intent are non -existent and are irrelevant. The respondent Federation has made an attempt to shift the blame on the petitioner by alleging that the petitioner had failed to sign the agreement. The petitioner has been consistently asserting that its Managing Director has visited the office of the Federation, met the Managing Director and the General Manager (M and P) for signing the agreement but he was told every time that draft of the agreement was lying with the Legal Advisor. On the question of Bank Guarantee the Managing Director of the petitioner company had written that the Bank Guarantee will be furnished within 3 days of signing of the agreement. In fact, the petitioner would not have been in a position to lift the products without first furnishing, the bank guarantee. The petitioner's assertion that Shri Mohan Singh Raghav had met Dr. Hari Lal, General Manager (M and P) of the Federation had not been controverted for an affidavit of Dr. Hari Lal. However, the controversy sought to be created on behalf of the respondent No. 2 on the question as to which party has defaulted regarding the signing of the agreement, the notings of the Managing Director on 29.6.1990 as well as the statement made by the respondent No. 4 on the floor of the Assembly on 16.7.1990 conclusively established that respondent No. 4 had instructed the authorities not to take further action in the matter of appointing Selling Agent and the further action certainly included signing of agreement. Whether it was justified or not for the Federation to have acted under the instructions of respondent No. 4 is not relevant for determination of the question as to whether the petitioner had defaulted in signing the agreement. On the question of fault of the petitioner the answer is very simple and this has to be in negative because the Federation itself had decided not to take further action as per the letter of intent of the petitioner is clearly erroneous and is untenable. Equally untenable is the second reason mentioned in the letter that the petitioner has failed to furnish the bank guarantee. The petitioner had written to the Federation on 26.6.1990 that it would furnish the Bank Guarantee within 3 days of signing of the agreement. No further communication was sent to the petitioner by the Federation stipulating that if he failed to furnish bank guarantee within specified time, the Federation would cancel its appointment as Selling Agent. Thus, the petitioner could very well rely on his request for furnishing bank guarantee within 3 days of the signing of the agreement. Moreover, as already mentioned hereinabove, the Federation had in deference of the desire of the respondent No. 4 decided not to take further action. There is nothing on record to show that after 30.6.1990 the Federation had sent any communication to the petitioner about fulfilment of the two conditions stipulated in letter dated 1.6.1990. Therefore, in my opinion both the reasons given by the respondent No. 2 for cancelling letter of intent are untenable and erroneous.

(3.) ACCORDING to the learned Counsel for the petitioner while Annexure -R/6 was passed, he came to know about the process, When pre -qualification is judged. A committee has been constituted by the respondents and it is this committee which decides the fate of the tenders. In deciding the controversy by a sole officer i.e. the Addl. Chief Engineer, Irrigation Zone, Jodhpur violation of the internal rules of the respondents have been committed.