JUDGMENT
Devinder Gupta, J.
(1) Circular dated 2.8.1991 issued by respondent No.2 spelling out the policy of respondent No. 1 restricting registration of suppliers for the supply of “Meat Tinned” only to public sector undertakings (for short ‘PSUs’) and State Level Federations (for short ‘Federations’) owning manufacturing units is under challenge in this petition filed under Article 226 of the Constitution of India. At the time of filing of this writ petition, the petitioner had also sought relief restraining respondents 1 & 2 from accepting the tender of respondent No.3 and seeking directions to consider the petitioner’s tender dated 23.9.1991 for supply of 800 metric tonnes Meat Canned Curried for the consumption of Indian defense Forces. These prayers have now become infructuous due to the contract being awarded in favor of respondent No.3 and period of supply having come to an end. Petitioners now seek prayer (a) and (c) namely to quash the circular dated 2.8.1991 and to direct respondents 1 & 2 to accept the registration of the petitioner for enlistment as an approved contractor for the supply of ‘Meat Tinned’.
(2) Petitioner is a private limited company registered under the Companies Act. It commenced the business of meat processing in the year 1943 and claims to be the premier manufacturer/supplier within and outside India of meat and poultry products. It is alleged that it has-all the requisite equipments and facilities for undertaking bulk supplies. From 1959 till about 1985 petitioners had been supplying regularly ‘tinned mutton’ and ‘tinned pork’ to the Indian defense Forces and it is respondent No. 1 who procures food items for defense forces through respondent No.2. Respondent No. 1 is the over-all policy making authority for the purchases to be made for the forces. Because of its high standard and quality and ability to deliver large quantities of meat, respondent No.2 repeatedly placed orders on petitioners for supply of ‘meat tinned curried’.
(3) From 1988 to 1990, according to the petitioners, no tender notices for purchase of ‘meat tinned curried’ were issued or advertised by the respondents. Orders, however, were placed for this meat item by respondent No.2 by direct negotiations with PSUs or Federations.
(4) Through a circular, Annexure Iii, dated 2.8.1991 ‘respondent No.2 invited registration applications from suppliers, interested in supplying essential food items for armed forces. The circular, however, restricted the registration for the supply of ‘meat tinned’ only to PSUs and Federations owning manufacturing units. Private firms/suppliers, however, were permitted to register themselves for supply of only chicken/fish tinned. According to the petitioner, this restriction imposed, in so far as supply of ‘meat tinned’ is concerned is arbitrary, opposed to public policy and is detrimental to the interest of the petitioner and other persons similarly situate, namely, private manufacturers/suppliers.
(5) Petitioners state that after the impugned circular was issued, an application was submitted by it on 6.9.1991 seeking registration for meat tinned/fish/chicken curried. Through letter dated 13.9.1991 the petitioners’ application was returned calling upon the petitioners to delete meat item from column 12 of the form, on the ground that meat items are to be procured only from PSUs / Federations. Petitioners were also advised to re-submit the application, after deleting meat items from the relevant column. Petitioners, thus, considered fit and eligible to supply fish/chicken curried tin, it is ununderstandable as to how the petitioners are not considered fit and suitable for supply of ‘meat tinned’, more especially when petitioners’ performance in making supplies earlier had been to the utmost satisfaction of the authorities. Again on 17.9.1991, in pursuance to respondent No.2 placing an .advertisement dated 7.9.1991, petitioners submitted its tender for supply of 800 metric tonnes meat tinned curried, Jhatka (Goat/Sheep) (Chunks/Keema). This tender was rejected on the ground that petitioners were not eligible being a private manufacturer/supplier. Petitioners had quoted rate of Rs. 74.00 per Kilo, exclusive of taxes. Besides petitioners’ tender, the only tender received was that of M/s Rajasthan State Cooperative Sheep & Wool Marketing Federation Ltd. (respondent No.3) who had quoted a rate of Rs. 86.5 per Kilo, exclusive of taxes. There was a difference in price between the two tenders to the tune of Rs.11.50 per Kilo or in other words an overall difference of Rs. 1,04,00,000.00, including sales tax, for supply of 800 metric tonnes quantity.
(6) Petitioners contend that the impugned circular is not based on well formulated policy of respondent No.1. There is no lawful justification for restricting the. registration for the supply of meat tinned only to PSUs/Federations, including manufacturing units and to deprive the private firms/suppliers from registration. In this manner, an unnecessary monopoly in favor of inefficient and loss making PSUs and Federations is sought to be created. The policy is irrational in the present changing economic scenario. Petitioners have also tried to high-light by making various averments in the petition that respondent No.3, though a Federation is unable and incapable of performing itself the contracts awarded to it by respondent No.2, since it lacks requisite knowhow, expertise and resources. It is alleged that in the year 1988 respondent No.3 had sub-contracted its contract in favor of a private manufacturer namely M/s Gitwako Farms (India) Private Ltd. By sub-contracting for the processed meat, respondent No.3, in fact, sub-contracted almost 80% of the contract work awarded to it by respondent No.2. Thus, according to the petitioners there is every possibility of the alleged policy being mis-used, inasmuch as the private suppliers indirectly handling the contract.
(7) Respondents 1 & 2 have filed their counter on the affidavit of Shri B.C. Mandal, Assistant Chief Director of Purchase, Ministry of defense, Government of India. It is dated 20.12.1991. It is stated that besides other purchases being made by the Army Purchase Organisation, Government of India also purchases tinned meat. The procurement of the tinned meat items is done only from PSUs/Federations possessing Mfpo Category A license. It is claimed that there is a policy decision of the Government of India not to purchase tinned meat from any firm, which is not a Psu or Federation possession Mfpo Category A license. The reason of formulating such a policy is contained in para 5 of the counter affidavit wherein it stated that policy decision was taken in 1985 at an appropriate level, after considering various sensitive issues in that regard. Items like meat tinned curried, Jhatka (goat/sheep) is a very sensitive item from the point of religious sentiments of Indian people, including armed forces. Prior to 1985 there was no restriction for procurement of the said items from suppliers, other than PSUs/Federations. But in 1985 conscious policy decision was taken to avoid any adulteration of cheaper variety of meat with Jhatka (Goat/Sheep). It is further stated, while justifying the formulation of policy, that adulteration of cheaper variety of red meat and Halal variety of goat/sheep meat with Jhatka variety of the said goat/sheep meat might heart the religious sentiments of armed forces thereby leading to revolt among armed forces. It is difficult to detect, without full scale laboratory test, the adulteration of red meat with cheaper and sensitive red meat. Keeping in view these considerations, policy was formulated in 1985 at the highest level, including defense Minister, regarding procurement of tinned meat only from PSUs/Federations.
(8) In addition to supplying the reasons for formulating policy, it is also claimed by respondents 1 2 that PSUs/Federations form a separate class in themselves and the policy for allowing exclusive registration in their favor cannot be said to be a cause of discrimination. It is claimed that petitioners and other private suppliers are permitted to register themselves for the supply of only chicken/fish tinned, which relaxation has been granted considering the fact that the same being white meat cannot be adulterated by any other meat than the white meat. It has also been stated that petitioners firm is not possessing Mfpo Category A license, which is a license granted to manufacturing units where slaughter house is a part of the factory, where the canned meat is processed. Gate gory B license is possessed by those units where slaughtering of goats/sheep’s is done in a municipal slaughter house and then brought to the factory for the purpose of processing. Even if the petitioners’ grievance is met by withdrawing the policy, even in that case petitioners not possessing/ Mfpo Category A license cannot make any grievance for not being enlisted.
(9) Respondent No.3 has also filed its separate return on the affidavit of Dr. R.K. Bhatia, General Manager of respondent No.3. In so far as policy is concerned its stand is similar to that of respondents 1 & 2. Respondents have also in their respective returns tried to justify the difference in price quoted by the petitioner and respondent No.3 stating that there is no loss to the public exchequer. Moreover, according to respondents, petitioners’ quotation at the rate of Rs.74.00 per Kilo was not genuine one and the same was done by the petitioner only to create obstacles and confusion for awarding contract in favor of respondent No.3. According to respondent No.3, it is equipped and has got the requisite infra structure for manufacturing and supplying of the relevant articles to the Army and supplies are being made to the entire satisfaction of respondent No.2.
(10) Petitioner in rejoinder affidavit to the two counter affidavits, has further questioned the rational of the reasons in support of the policy, alleging that the apprehension of adulteration which has been made as one of the grounds in formulating the policy is only with a view to shift focus from the arbitrary and irrational conduct. According to the petitioner, adulteration is not possible since as per the Army Supply Corps Specifications No. 115 B, a Veterinary Officer from the Round Veterinary Corps (“RVC”), inspects the livestock to be slaughtered, brands the live-stock on the hooves and inspects the carcasses on the following day with hooves intact. Once the meat products are processed, the same are sealed in a bonded godown under the supervision of a Board of Army Officers, which also draws random samples from each day’s production, which are then tested at the Composite Laboratory both for Chemical and bacteriological parameters enumerated in Asc Specification No. 115 B. Only upon the approval by the Laboratory, the bonded goods are dispatched and this dispatch is also supervised by another Board of Army Officers. The entire process is not only a safeguard but also rules out any possibility of any adulteration. In addition, it is stated that there is no iron clad guarantee that adulteration cannot occur when a contract for meat products is placed with PSUs/ Federations.
(11) We have heard learned counsel for the parties. At the time of hearing learned counsel for respondents 1 & 2 made available to us the entire record, including the file containing various notes which resulted in the policy formulated in the year 1985.
(12) The short question which arises for determination is the legality and validity of the circular dated 2.8.1991. In a case like the present if it is shown that the action of the Government in formulating the policy is arbitrary and, therefore, violative of Article 14 of the Constitution, there cannot be any impediment in striking down the act. In Kumari Shrilekha Vidyarthi etc. etc. v. State of U.P. and others reviewing the case law, the Apex Court held: “BRINGING the State activity in contractual matters also within the purview of judicial review is inevitable and is a logical corollary to the stage already reached in the decisions of this Court so far. Having fortunately reached this point, we should not now turn back or take a turn in a different direction or merely stop there. In our opinion, two recent decisions in M/s Dwarkadas Marfatia and Sons and Mahabir Auto Stores (supra) also lead in the same direction without saying so in clear terms. This appears to be also the trend of the recent English decisions, it is in consonance with out commitment to openness which impels scrutiny of every State action to provide an effective check against arbitrariness and abuse of power. We would much rather be wrong in saying so rather than be wrong in not saying so. Non- arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every public functionary, in whatever sphere, must be guided by reason and not humour, whim, caprice or personal predilections of the persons entrusted with the task on behalf of the State and exercise of all power must be for public good instead of being an abuse of the power. ”
(13) While coming to the aforementioned conclusions, the Court referred to a number of earlier decisions on the point and taking it for certain the proposition that Article 14 of the constitution applies also to matters of Governmental policy and held that if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional.
(14) In such like cases where a person alleges arbitrariness, burden is on him to prove arbitrariness which can be done by showing in the first instance that the State’s action is uninformed by reasons, in as much as there is no discernable principle on which it is based or it is contrary to the prescribed method of exercise of power or is unreasonable. If it is shown then the burden naturally shifts to the State to rebut the attack by disclosing the material and supplying reasons which led to the action being taken, in order to show that it was an informed decision which was reasonable. If a prima facie case of arbitrariness is made out and the State is unable to show that the same is an informed action which is reasonable, the State action must perish as arbitary.
(15) In the instant case, the petitioners have prima facie shown about the discrimination in the State action by pointing out that the policy decision was formulated depriving one set of persons, namely, private manufacturers and preferring another set, namely, PSUs/Federations which in the counter filed by the respondents is sought to be justified by alleging that it was done in order to obviate the possibility of adulteration since adulteration, in red meat can easily be made, which it is difficult to detect, without full scale laboratory test. Some doubts have been created as regards the reasons in support of formulation of policy ‘that where these reasons prevailed when policy was formulated or not. It is so since in reply to one of the miscellaneous applications (CM 3960/93), moved by the petitioner, respondents 1 & 2 on the affidavit of G.S.N. Murthy, Assistant Chief Director of Purchase/Ministry of defense, Government of India, which was placed on record on 27.7.1993 slightly different stand was taken. In the said reply it was stated that: “PRIOR to 1985 the Ministry of defense used to procure mil products through open tendering inviting private firms. During 1985 all private firms pooled together and not only quoted exhorbitant rates but also backed out when the market price went up due to scarcity of milk. That was a critical time for Ministry of defense to take a decision decision on policy matters to surmount such situation. Sh. Kurian, Chairman of the National Diary Development Board was invited for discussions. A High level decision was taken to procure diary products from National Co-operative Diary Federation of India Limited and its members Federation only. Subsequently the Policy procedure in procurement of Tea was also altered. Besides these items the Ministry of defense also took decision at High level to procure meat tinned from Public Sector Undertakings having Mfpo Category ‘A’ license only to ensure not only the quality aspect but also timely supply. As already stated procurement of Meat (Curried) is a very sensitive nature of product and it can arouse religious feelings among the army persons. Decision of the Ministry, therefore, to procure Meat tinned only from Public Sector Undertakings having Mfpo Category ‘A’ license cannot be said to be arbitrary, unreasonable or against public policy.”
(16) In this background we had called for the files.
(17) On going through the relevant files, what can be noticed is that the reasons as disclosed in the two affidavits, one filed with the counter on 20.12.1991 and the other filed with the reply to Cm 3960/93 on 27.7.1993, were not at all made the basis, while taking a decision to restrict the placing of orders for the supply of meat tinned on PSUs/Federations.
(18) The relevant files produced further suggest that during the year 1991, a private supplier, namely, M/s Viking’s Food Products Pvt. Ltd. had sought participation in the tenders for tinned mutton/keema. While dealing with such request, it was noted on the file that in the year 1985, a policy decision was taken with the approval of the then Finance Minister that meat and pork products be procured only from PSUs. There was a suggestion to review the said policy. Naturally the official concerned wanted to look at the relevant file by which the case was dealth with, in order to ascertain about the reasonings which prevailed while formulating the said policy. In the note dated 18.1.1991, it is recorded that “WE are not able to assess as to why the Ministry chose to place orders on only Public Sector Undertakings. No information is available as to whether there was any participants from private Sector in the linked file.”
(19) The file dealing with the policy containing the note of Ministry of defense has also been made available to us and the note which was approved by the defense Minister, deciding to place orders only on PSUs for supply of meat and pork products says: “PROCUREMENT of tinned food stuff and tea etc., has been entrusted to the Canteen Stores Department. With the approval of the then R.M., we had taken a decision that tea required for the defense Forces would be procured only from the TTCI – A Govt. of India Undertaking. For the last two years, we are entering into negotiated contract with them and procuring this item from the TTCI. Performance of TTCI has, however, not been very good they have not kept to the delivery schedule and there is considerable backlog. 2. Similarly, in respect of milk products, viz., whole milk powder, skimmed milk powder, butter, etc., a decision had been taken that the first option would go to the National Dairy Development Board and its affiliated Federations failing which only we shall resort to purchase from the private sector. Consequently, we have entered into negotiated contracts with the Nddb, for these products. 3. In respect of tinned meat and pork products, Csd last year, as usual, floated open tenders. But ultimately, the contract was awarded to the Central Dairy Farm, Aligarh, a U.P. Government Undertaking and Rajasthan State Cooperative Sheep & Wool Marketing Federation, Jaipur. This Federation, is however, not on all fours with the definition of a Psu as given by the Bureau of Public Enterprises as a small percentage of its equity is owned by private persons. The Federation is therefore, not entitled to any price preference. 5. We have enquired from the Ministry of Agriculture as to the names and particulars of various Government Corporations dealing in meat and pork products. Vide End. 12/A they have intimated the names of five such organisations. They are :- (a)……… (b)……… (c)……… (d)…….. (e) ……… 6. It is proposed that like tea and milk products, we should procure tinned meat and pork products also only from the public sector. It is also proposed that the contracts may be finalised in the defense Ministry in consultation with the Army HQrs., and our Finance Division and thereafter the actual procurement work may be entrusted to the CSD.”
(20) No where in the entire file which was dealt with in the year 1985, the reasons which have now been stated in the counter or in reply to misc. application were considered or prevailed upon the Ministry while taking a decision. On reference to the file in which the request of private suppliers for relaxing the policy was dealt with, for the first time reason was sought to be supplied on 6.8.1991. In the earlier notes on the file dated 18.1.1991 it was recorded that reasons were not discernible. For the first time on 6.8.1991 an officer recorded that: “THERE have been persistent requests from private traders to participate in procurement of Meat Tinned. In view of the existing policy, this had not been agreed to. It may also be noted that troops are highly sensitive in regards to production and procurement of Meat from the premises which slaughter beef. This could be one of the reasons for the existing policy to procure Meat Tinned from. the Public Sector Undertakings.”
(21) The aforementioned note suggests that the reason now incorporated in the counter and reply was not at all the reason which prevailed at the time of taking a decision in the year 1985 while formulating the policy. The reasons put forth in the counter and reply appears to have been taken from the note of one of the officers recorded in the year 1991 to be the possible reason for taking a decision and formulating policy.
(22) The petitioner having alleged arbitrariness in the State’s action in having the impugned policy, it was for the petitioner in the first instance to show that the State’s action is uninformed in reasons in as much as there is no discernable principle on which the policy is based. When in the counter and reply to misc. application we found conflicting reasons, the burden which was on the petitioner stood automatically shifted on respondents 1 & 2 to show and disclose the material. From the entire file in which the decision was taken we have found that the reasons which are now supplied were not the reasons in taking the decision. This ground alone is sufficient to strike down the policy. The burden which shifted on respondents 1 & 2 can not be said to have been discharged by projecting certain reasons, which were neither considered nor prevailed with the policy making authority by saying that these reasons might be the possible reasons which led to the formation of policy: In any case, we may also examine the reason now supplied, namely, avoiding of chances of adulteration.
(23) We have noticed above, the safeguards taken by the Army Authorities from the stage when an animal is slaughtered till final product comes out within the manufacturing unit, in order to obviate any possibility of adulteration and also to have a stringent quality control/check over the product. The rational in restricting the placing of orders only on PSUs cannot possibly be sustained since in case adulteration is to be avoided keeping in view the religious sentiments, the same would equally apply to PSUs as also to the private suppliers for, which every possible effort is made to avoid by having stringent checks, right from the stage of slaughtering an animal till the final outcome of the product and the release of the items from the bonded warehouse. The policy which prohibits a citizen who otherwise is qualified in making supplies from the sphere of competition, thus, has to be held to be arbitrary.
(24) The submission of respondents that petitioner is not Category ‘A’ licensee under Meat Food Products Order, 1973 and thus is not entitled to any relief is also not sustainable. According to the petitioner, it had the requisite Category ‘A’ license but the same was not got renewed for the subsequent period because there were no pending orders in its hands otherwise it has got all infra structures. Such license can be procured by the petitioners by applying to the authorities under the provisions of the MFPO. We need not go into this question at this stage, since registration, if any, of the petitioner, because of the quashing of the policy has necessarily to be subject to petitioners fulfillling the other conditions, one of which obviously would be in its having the requisite Mfpo Category A license.
(25) On the question of delay and laches in preferring the petition to question the policy, it is contended by the learned counsel for respondents that policy is in force since 1985-86 and the petition to challenge the same was filed are more than 5 years, which deserves to be dismissed. We are not quite satisfied with the submissions made on behalf of respondents and find that the delay not only was sufficiently been explained but in the facts and circumstances there is no delay. It is not disputed that the petitioner continued to supply Meat Tinned to respondent No.2 from 1959 to 1985. For the period 1988 to 1991 respondent No.2 did not invite any tenders for supply but placed orders on negotiation. The petitioner’s registration with respondent No.2 for the supply of Meat Tinned was valid till 1990. It was through Circular annexure Iii dated 2.8.1991 that fresh registration was invited by respondent No.2, in pursuance to which the petitioner applied on 6.9.1991, which was returned to the petitioner on 13.9.1991. The petition was filed on 23.11.1991. Thus, not only the delay is explained but on facts it cannot be said that the petition is liable to be dismissed due to delay and laches, there being none. No other point was urged.
(26) Consequently, we allow the writ petition, quash the circular dated 2.8.1991 which restricts the registration for supply of meat tinned only to PSUs and Federations owning manufacturing units and direct the respondents to consider the application of the petitioner for registration and if it is otherwise in order to enlist it as an approved contractor for the supply of meat tinned. Reasonable time be allowed to the petitioner to enable it to obtain the requisite license under the MFPO. Rule is made absolute. Petitioner will have its costs from respondent No. 1 quantified at Rs.2,500.00.