PETITIONER:
HARMINDER SINGH ARORA
Vs.
RESPONDENT:
UNION OF INDIA & ORS.
DATE OF JUDGMENT09/05/1986
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
PUNCHHI, M.M.
CITATION:
1990 SCALE (1)145
ACT:
Constitution of India, Arts. 32 and 226-Government
Contracts by calling tenders-Whether can be assailed in writ
proceedings as infringing fundamental rights.
Government Contracts by tenders-Variation of terms of
tender-Whether notice to parties obligatory.
HEADNOTE:
The appellant is carrying on the business of bulk
supply of milk and milk products for the last twenty years.
He has a plant for pasteurization at Pune. On July 16, 1985
the officer-in-charge of the Military Farms-respondent No.
2, issued tender notice for the supply of pure fresh buffalo
and cow milk. The appellant being eligible and already on
the approved list of the respondent authority, submitted a
tender offering fresh buffalo milk of the specified fat
content and gravity giving a rate of R.S.. 421 per 100
litres. The General Manager, Government Milk Scheme, Pune-
respondent No. 4, also submitted a tender for the supply of
pasteurized milk, an item not contemplated by the tender
notice, at Rs.400 per 100 litres. Tenders were opened on
August 23, 1985 and the appellant was found the lowest
bidder.
The Military officer concerned submitted a report to
the higher authority stating that the appellant was not only
the lowest 'bidder but also that the purchase of milk from
him would be profitable, while the purchase of milk from
respondent No. 4 would result in serious loss to the extent
of rupees ten lakhs or so. But all the same, the respondent
authority accepted the higher bid of respondent No. 4, in
preference to the lower bid of the appellant contrary to the
terms of the notice inviting tender. Feeling aggrieved by
the rejection of his tender, the appellant challenged the
order by filing a writ petition in the High Court which was
dismissed in limine.
In this appeal by special leave on behalf of the
appellant it was
64
contended that even in the matter of contracts, the
Government has to act fairly and justly and the failure of
the Government to do so gives a right to the citizen to
approach the court for justice, that the authority concerned
in rejecting his tender had acted contrary to the principles
of law, unfairly, arbitrarily and discriminately, that the
tender submitted by respondent No. 4 was not in consonance
with the tender notice and it should have been ignored, and
that if the authority wished to alter the conditions of the
tender notice it was obligatory and mandatory for it to call
him for negotiation. It was further contended that the 10
per cent price preference given to respondent No. 4 contrary
to the terms of the tender notice was illegal and
discriminatory.
On behalf of the respondents it was contended that
respondent No. 4 being the Government agency was rightly
awarded the contract as per the policy of the Government of
India laid down in notification dated August 13, 1385.
Allowing the appeal, the Court,
^
HELD: 1. The Government may enter into a contract with
any person but in so doing the State or its
instrumentalities cannot act arbitrarily. It is open to the
State to adopt a policy different from the one in question,
but once the authority or the State Government chooses to
invite tenders then it must abide by the result of the
tender. [75 C-D; 77 D-E]
2. The High Court was not justified in dismissing the
writ petition in limine by saying that the question relates
to the contractual obligation and the policy decision cannot
be termed as unfair or arbitrary. [77 E]
There was no question of any policy decision in the
instant case. The notification dated August 13, 1985 laying
down the policy came in after July 16, 1985 when respondent
No. 2 issued tender notice. The instrumentalities of the
State having invited tenders for the supply of fresh buffalo
and cow milk, these were to be adjudged on their intrinsic
merits in accordance with the terms and conditions of the
tender notice. The contract for the supply of milk was to be
given to the lowest bidder under the terms of the tender
notice and the appellant being the lowest bidder, it should
have been granted to him. The authority acted capriciously
in accepting a bid which was much higher and to the
detriment of the State. [75 B-D; 77 D-F]
3. Where the tender form submitted by any party is not
in con-
65
formity with the conditions of the tender notice the same
should not be A accepted. So also, where the original terms
of the tender notice are changed the parties should be given
an opportunity to submit their tenders in conformity with
the changed terms. [72 C-E]
4. The authority acted arbitrarily in allowing 10 per
cent price preference to respondent No. 4. The terms and
conditions of the tender had been incorporated in the tender
notice itself and that did not indicate any such price
preference to government undertakings. The only concession
available to Central/State Government or to the purely
government concerns was under para 13 of the notice, that
is, that they need not pay tender form fee and earnest
money. No other concession or benefit was contemplated under
the terms of the tender notice. [73 A-C ]
Ramana Dayaram Shetty v. The International Airport
Authority of India & Ors., [1979] 3 SCR 1014; V. Punnan
Thomas v. State of Kerala, AIR 1969 Kerala 81; C.K. Achuthan
v. State of Kerala [1359] Suppl. 1 SCR 787; Viklad Coal
Merchants, Patiala etc. etc. v. Union of India & Ors. AIR
1984 SC 95; and Madhya Pradesh Ration Vikreta Sangh Society
JUDGMENT:
SCR 750, referred to.
&
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 824 of
1986
From the Judgement and order dated 10. 1.1986 of the
Bombay High Court in W.P. No. 5327 of 1985.
S.N. Kacker. Rani Chhabra and Swatanter Kumar for the
Appellant.
V.S. Desai, C.V. Subba Rao, A.S. Bhasme and A.M.
Khanwilkar for the Respondents.
The Judgment of the Court-was delivered by
R.B. MISRA, J. The present appeal by special leave is
directed against the judgment and order dated January 10,
1986 of the High Court of Judicature at Bombay dismissing
the petition under Article 226 of the Constitution filed by
the appellant.
The appellant is carrying on the business of bulk
supply of milk,
66
products and milk cream etc. The appellant is well-known in
the said field and has a plant of pasteurization in Pune and
has been carrying on the said business for more than twenty
years. The appellant installed a plant for pasteurization at
a heavy cost to the tune of rupees three lakhs. The
appellant has been supplying large quantities of milk and
milk products pasteurized or otherwise to various companies,
Government Departments including respondents Nos. 2 and 3.
The appellant as a registered contractor has been supplying
fresh buffaloes and cows milk to respondent Nos. 2 and 3 as
per the requirements for the last twenty years. The
appellant is on their approved list for the same period and
his supplies and work were always appreciated and accepted
by the respondents for all these periods.
The appellant is also capable of supplying any quantity
of pasteurized milk and, indeed, he had been supplying to
various organisations the milk and milk products and also
pasteurized milk. Later on Respondent No. 2, the officer-
incharge of the Military Farms, Pimpri, directed that the
local purchase of milk be stopped and regular supply under a
contract by inviting tenders be effected. Accordingly, the
appellant’s contract for supply of fresh buffalo and cow
milk ended in 1984
The Military Farm had its own plant for pasteurization
and for all these years respondents Nos. 2 and 3 had been
making purchases of only fresh buffalo milk and used to
pasteurize the milk for their own purposes in their own
plant. The plant of respondents 2 and 3 is very much in
operation till to-day and also on the date of inviting
tenders in question .
Respondent No. 2 issued on or about July 16, 1985
tender notices for the supply of fresh buffalo or cow milk.
The said tender notice was published in the Indian Express
on July 29, 1985. The tender notice was also sent to the
appellant by Respondent No. 2 by registered post
acknowledgement due which was received by the appellant in
July 1985. By the said tender notice, the respondent had
invited tenders for supply of fresh buffalo or cow milk at
Military Farms of Pimpri, Pune. The appellant being eligible
and already on the approved list of the respondents
submitted a tender for supply of fresh buffalo milk to
respondents 2 and 3 as per the requirements stated in the
tender notice. The appellant had offered the milk at the
rate of Rs.4.21 per litre having 6 per cent fat and specific
gravity of 1.030 as required in the tender notice, thus,
giving a rate of Rs.421 for each 100 litres.
67
Respondent No. 4, General Manager, Government Milk Scheme, A
Pune, also submitted a tender but the tender of respondent
No. 4 related not to the item asked for in the tender notice
viz. fresh buffalo or cow milk but related to the supply of
pasteurized milk. While the cow milk asked for in the tender
provided for 4 per cent fat with a specific gravity of
1.029, respondent No. 4 agreed to supply pasteurized milk
for Rs.4 per litre, that is Rs.400 per 100 litres.
It appears that after the submission of the tender, the
appellant received a notice dated October 30, 1985 from
respondent Nos. 2 and 3 requesting the appellant to extend
the validity period of tender up to November 30, 1985 on the
same terms and conditions as mentioned in the tender
submitted by the appellant. The appellant acceded to the
request and extended the validity period till November 30,
1985 in view of the long standing business and his good
relations with respondents 2 and 3.
During this period respondents 2 and 3 kept on
receiving sup- plies of fresh buffalo milk to the
satisfaction till the appellant was asked to stop the supply
from November 20, 1985 vide letter dated October 30, 1985,
although the appellant had been requested earlier to
continue the supply at least up to December 1, 1985 vide
letter dated October 30, 1985. The appellant thus had to
suffer a huge loss on account of the abrupt stoppage of the
supply.
Tenders were opened on August 23, 1985. The appellant
was the lowest bidder. The rates given by the appellant in
the tender for supply of fresh buffalo milk was lower and
tender of respondent No. 4 could be of no consequence as it
was for a different item not contemplated by the tender
notice. The tender given by Respondent No. 4 was however
accepted on November 19-20, 1985 and the tender of the
appellant was rejected although it was lower than that of
respondent No. 4. The concerned officer had made a report to
the higher authorities about the two tenders, one from the
appellant and the other from respondent No. 4, vide letter
dated August 23, 1985. It will be appreciated at this stage
to refer to the advice given by the officer concerned which
is as follow:
“CONCLUSION OF CONTRACT FOR SUPPLY OF MILK AT PR
MF KIRKEE / PIMPRI.
1. Reference discussion DDME and ADMP of date.
68
2. The information required is given below:
(a) The cost of blended milk and standard milk
taking the buff milk rate of Rs.421 for 100 litres
works out to:
i) Blended Milk (Taking -Rs.3.59per lit of BMP Rs.28 per kg.) 10% price preference -Rs.0.36 --------
ii) Standard Milk (Taking cost of -Rs.3.48 per
litre separated milk Rs.2.30
per litre)
10% price preference -Rs.0.35
——–
Rs.3.83
——–
(b) If contract for purchase of cow milk is
concluded, farm will lose 41 paise per litre on
blended milk and 52 paise on standard milk per
litre. Taking a daily purchase of 3000 litres of
cows milk for which tender has been called for it
will amount to a loss of Rs.4.48 lakhs in terms of
blended milk and Rs.5.69 lakhs in terms of
standard milk during the period of contract of one
year.
3. In so far as pasteurization is concerned, milk
has to be repasteurized as delivery timings of
units in the station are different. Moreover, even
if Milk Scheme delivers the milk just before one
hour of sending out the delivery rounds, it will
only save on electricity charges which will be
negligible. The 7,500 litres of cows milk being
produced daily at Pimpri has to be pasteurized for
which the daily section will continue to work as
it is at present.
4. The collection charges under farm arrangement
works out to Rs.0.10 per litres. The details are
enclosed at Appendix-‘A’. Though collection
charges will be less by 10 paise but it will cause
lot of inconvenience to the dairy staff because
milk is already being collected three times a day
from Pimpri and lot of difficulties are being
experienced in route. If Milk Scheme delivers the
Milk at MP Dairy that arrangement will be the
best. “
From the above report it is obvious that the
respondents will be put to substantial loss to the tune of
about Rupees ten lakhs by accept-
69
ing the tender of respondent No. 4 but all the same the
tender of respondent No. 4 was accepted in preference to the
tender made by the appellant. Respondents 2 and 3 would have
gained by accepting the tender of the appellant which is
strictly in terms of the tender notice because the
respondent could further increase the quantity of milk by
diluting the same to bring to fat and gravity standard. From
the terms and conditions inviting the tender, the Government
suppliers were given exemption from depositing the earnest
money and tender form fee but no other concession to the
Government supplies was indicated in the tender notice yet
10 per cent price preference was given to respondent No. 4
without any basis and in violation of the terms of notice
inviting the tender. All the same the price of the appellant
quoted in the tender was lower than that of respondent No. 4
and there was absolutely no justification whatsoever for not
accepting the tender of the appellant.
To start with the appellant had made an offer of Rupees
four hundred fifty per hundred litres but para 16 of the
tender notice provided for negotiations by respondents 2 and
3 with the contractors on rates or otherwise. As a result of
subsequent negotiations between the appellant and the
respondents, the offer of Rs.450 was reduced to Rs.421 per
hundred litres. If the tender notice had indicated for the
supply of pasteurized milk there was no difficulty for the
appellant to have done so. But in the absence of any such
indication in the tender notice and in the absence of any
subsequent negotiations between the appellant and the
respondents under para 16 of the tender notice, the
appellant offered to supply the buffaloes or cows fresh
milk.
Feeling aggrieved by the rejection of his tender, the
appellant challenged the order of the authority concerned by
a Writ Petition in the High Court. The Writ Petition was,
however, dismissed in limine by a cryptic order as under:
“Heard both sides. The Writ Petition involves
Questions relating to contractual obligations.
Even otherwise, we do not find that there is
anything wrong or unfair in accepting the milk
from the Government Milk Scheme. The policy
decision cannot be termed as unfair or arbitrary.
Hence W.P. rejected.”
The appellant has now come to challenge the judgment
and order of the High Court dated 10.1.1986 by special
leave. Shri S.N. Kacker, learned counsel appearing for the
appellant has reiterated the same contentions as had been
raised before the High Court.
70
The main contention is that the authorities concerned
had acted contrary to the principles of law, unfairly,
arbitrarily and discriminately. The appellant being the
lowest bidder his tender ought to have been accepted by the
Panel officers and there was absolutely no reason or
justification for the respondents to reject the same. It was
further contended that the tender submitted by respondent
No. 4 was not in consonance with the requirements of the
tender form and, therefore, that should have been ignored.
The tender notice demanded supply of fresh buffaloes or cows
milk hut respondent No. 4 had submitted for pasteurized
milk. In any case, if the respondents wished to alter the
invitation of the tender it was obligatory and mandatory for
the respondents to call the appellant for negotiations
before rejecting his tender and accepting the tender of
respondent No. 4. There was a clear provision for
negotiation in the tender notice and it was open to
respondent No. 4 to have negotiated with appellant and asked
him to tender for the supplying pasteurized milk. In any
case, on the own admission of the respondents, that the
pasteurized milk supplied by respondent No. 4 would have to
be re-pasteurized and secondly the cost of 5() paise had to
be added even to the price of respondent No. 4 as the same
was being added to the price given by the appellant. The
action of the respondent is completely arbitrary and
discriminatory inasmuch as respondent No. 4 merely being the
Government organisation had been given preference over the
appellant while respondent No. 4 had no better quality or
standard for effecting the supplies asked for under the
contract and even tor the pasteurized milk. Even in the
matter of contract, the Government has to act fairly and
justly and the failure of the Government to do so given a
right to the citizen to approach the court for justice. The
respondents have made a wrongful exercise of their power in
rejecting the tender of the appellant.
It was contended for the appellant that he being the
lowest bid der, the authorities concerned acted arbitrarily
in accepting the bid of respondent No. 4 which was higher
than that of the appellant. We find considerable force in
this contention. In Ramana Dayaram Shetty v. The
International Airport Authority of India and Ors., [1979] 3
SCR 1014, this Court laid down the law in this respect in
the following words:
“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
71
will and, like a private individual, deal with any
person it pleases, but its action must be in
conformity with standard or norms which is not
arbitrary, irrational or irrelevant. The power or
discretion of the Government in the matter of
grant of largess must be confined and structured
by rational, relevant and non-discriminatory
standard or norm and if the Government departs
from such standard or norm 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.”
On August 23, 1985, the officer of the Military
Department submitted a report to the Higher Authority
stating therein that the appellant was not only the lowest
bidder but also the purchase of milk from the appellant
could be profitable while the purchase of milk from
respondent No. 4 would result in serious losses to the
extent of Rupees ten lakhs or so. The report further
indicates that respondents would have to re-pasteurize the
milk for its supply to its various units without any profit
because the minimum fat standard of 4 per cent with the
gravity of 1.029 has to be maintained. As such the entire
labour would be deployed without any fruitful result or
benefit to the respondent while on the other hand, if the
respondent wished, by pasteurizing the fresh milk supply of
the appellant they could otherwise earn profits extracting
fat while maintaining the fat and the gravity standard. In
spite of the report of the Military Officer, the higher bid
of respondent No. 4 in preference to the lower bid of the
appellant was accepted. It clearly indicates that the action
of the respondent authority was arbitrary and fanciful.
The terms contained in the tender notice have been
detailed in the notice itself and it is not necessary to
refer to all the terms but we would refer to paras 2, 16 and
19. Para 2 of the tender notice provides that tenders will
be invited for the supply of pure fresh buffaloes milk
testing not less than 6.0% butter fat and 1.030 specific
gravity or pure fresh cows milk testing not less than 4%
butter fat and 1.029 specific gravity daily at Military
farms/depots as mentioned in Appendix `A’.
Para 16 provides that as per orders of Army
Headquarters, Military Farms contracts are to be concluded
through a panel of officers which may hold negotiations with
the contractor where necessary and recommend the reasonable
rates to the higher authorities.
72
Para 19 provides that the Central Government/State
Governments are purely governments concerns need not pay
tender form fees and earnest money. They are, however,
requested to inimate the period of supply for which they
desire to tender their rates to enable the undersigned to
send them the required tender form.
It is contended for the appellant that the tender
submitted by respondent No. 4 did not satisfy the
requirement of para 2 of the tender notice. The tenders had
been invited for the supply of pure fresh buffaloes milk or
fresh cows milk but the respondent had submitted tender for
supplying pasteurized milk, and therefore, the tender
submitted by respondent No. 4 being not in conformity with
the tender notice should not have been accepted by the
authorities. In any case, if the tender of respondent No. 4
regarding supply of pasteurized milk was accepted and the
original terms of the tender notice were changed, the
appellant should have been given an opportunity to submit
his tender in conformity with the changed terms but this was
not done which has caused serious prejudice to the
appellant. If the tender forms submitted by any party is not
in conformity with the conditions of the tender notice the
same should not have been accepted but the authorities
concerned arbitrarily and in a fanciful manner accepted the
tender of respondent No. 4. The State of its instrumentality
has to act in accordance with the conditions laid down in
the tender notice. In any case if the authorities chose to
accept the tender of respondent No. 4 for supplying
pasteurized milk, the appellant should also have been given
an opportunity to change its tender. The authorities have,
however, given preference to the tender of respondent No. 4
for offering to supply pasteurized milk contrary to the
terms contained in para 2 of the tender notice. We find
considerable force in this contention of the appellant.
It was next contended that the conditions contained in
the tender notice did not contemplate of giving 10 per cent
price preference to Government undertakings yet 10 per cent
price preference was given to the Government illegally and
the policy of the Government to give 10 per cent price
preference to Government undertaking was discriminatory and
violative of Articles 14 and 16 of the constitution. The
State policy places respondent No. 4 above the appellant
without any basis or reasonable classification. In the
absence of any such stipulation in the contract such price
preference was unjustified.
If the terms and conditions of the tender have been
incorporated
73
in the tender notice itself and that did not indicate any
preference to the Government undertakings of giving 10 per
cent price preference to Government undertaking, the
authority concerned acted arbitrarily in allowing 10% price
preference to respondent No. 4. The only facility provided
to the Government undertakings was provided in paragraph 19
which contemplates that the Central or State Government
Departments are purely Government concerns need not pay
tender forms fees and earnest money. This was the only
concession available to the Central/State Government or to
the purely Government concerns, and no other concession or
benefit was contemplated under the terms of the tender
notice. If the appellant had known that 10 per cent price
preferene to Government undertaking was to be given to
respondent No. 4 the appellant would have taken every
precaution while submitting the tender. In support of his
contentions, Shri S.N. Kacker, appearing for the appellant
strongly relied upon Ramana Dayaram Shetty v. The
International Airport Authority of India and Ors. (supra).
In that case, the first respondent by a public notice
invited tenders for putting up and running a Second Class
Restaurant and Two Snack Bars at the International Airport
at Bombay. The notice, inter alia, stated in paragraph 1
that sealed tenders in the prescribed form were invited from
Registered Second Class Hoteliers having at least five years
experience for putting up and running a Second Class
Restaurant and two Snack Bars at the Bombay Airport for a
period of three years. Paragraph 8 stated that the
acceptance of the tender would rest with the Airport
Director who does not bind himself to accept any tender and
reserve to himself the right to accept or reject any tender
received without assigning any reason therefor. Out of the
six tenders received only the tender of the 4th Respondent
was complete and offered the highest amount as licence fee.
All the other tenders were rejected because they were
incomplete. As the 4th respondent did not satisfy the
description of a Registered Second Class Hotelier having at
least five years experience prescirbed in paragraph (1) of
the tender notice, the first respondent called upon the 4th
respondent to produce documentary evidence whether they were
registered second class hoteliers having at least five years
experience. The Fourth Respondent stated once again that
they had considerable experience of catering for various
reputed commercial houses, clubs, messes and banks and that
they held on Eating House Catering Establishment (Centeen)
Licence. On being satisfied by the information given by the
4th respondent, the first respondent accepted the tender on
the terms and conditions set out in its letter.
74
The appellant challenged the decision of the first
respondent in accepting the tender of the 4th respondent.
This Court held that the action of the first Respondent in
accepting the tender of the 4th respondent who did not
satisfy the standard or norms was clearly discriminatory
since it exlcuded other persons similarly situated from
tendering for the contract and it was arbitrary and without
reason. The acceptance of tender was invalid as being
violative of the equality clause of the Constitution as also
the administrative law for its arbitrary actions. This Court
also did not justify the action of the first respondent on
the ground that it could have achieved the same result by
rejecting all the tenders and entering into direct
negotiations with the 4th respondent. This Court observed:
“It is true that there was no statutory or
administrative rule requiring the 1st respondent
to give a contract only by inviting tenders and
hence the 1st respondent was entitled to reject
all the tenders and, subject to the constitutional
norm laid down in Article 14, negotiate directly
for entering into a contract. Paragraph (8) of the
notice also made it clear that the 1st respondent
was not bound to accept any tender and could
reject all the tenders received by it. But here
the 1st respondent did not reject the tenders
outright and enter into direct negotiations with
the 4th respondents for awarding the contract. The
process of awarding a contract by inviting tenders
was not terminated or abandoned by the 1st
respondent by rejecting all the tenders but in
furtherance of the process, the tender of the 4th
respondents was accepted by the 1st respondent.
The contract was not given to the 4th respondents
as a result of direct negotiations. Tenders were
invited and out of the tenders received, the one
submitted by the 4th respondents was accepted and
the contract was given to them.”
This Court quoted with approval the following
observations of Mathew J., in V. Punnan Thomas v. State of
Kerala, AIR 1969 Kerala 81:
“The Government is not and should not be as free
as an individual in selecting the recipients for
its largess. Whatever its activity, the Government
is still the Government and will be subject to
restraints, inherent in its position in a
democratic society. A democratic Government cannot
lay
75
down arbitrary and capricious standards for the
choice of persons with whom alone it will deal.”
Shri Anil Dev Singh, appearing for the respondents, has
contended that respondent No. 4 being the State Government
agency was rightly awarded the contract as per the policy of
the Government of India as laid down in Letter No.
12(1)/1/85/D/(QS) dated August 13, 1985. The policy adopted
by said letter dated August 13, 1985 came in after the 16th
July, 1985 when respondent No. 2 issued tender notice for
the supply of fresh buffalo or cow milk. As such the
notification dated August 13, 1985 is of no avail to the
respondent in so far as the acceptance of the tender of
respondent No. 4 is concerned. Acceptance or rejection of
tender made by the appellant or the respondent No. 4 will
depend upon the compliance of the terms of tender notice. It
is true that the Government may enter into a contract with
any person but in so doing the State or its
instrumentalities cannot act arbitrarily. In the instant
case, tenders were invited and the appellant and respondent
No. 4 submitted their tenders. The tenders were to be
adjudged on their own intrinsic merits in accordnace with
the terms and conditions of the tender notice. The learned
counsel, however, placed reliance on C.K. Achuthan v. State
of Kerala, [1959] Suppl. 1 SCR 787 where Hidayathullah, J.,
as he then was, held that a contract which is held from
Government stands on no different footing from the contract
held by a private party and when one person is chosen rather
than another, the aggrieved party cannot claim protection of
Article 14.
The wide observation made by Hidayatullah, J., was
explained in Ramana Dayaram Shetty (Supra). Bhagwati J. as
he then was, speaking for the Court observed:
“Though the language in which this observation is
couched is rather wide, we do not think that in
making this observation, the Court intended to lay
down any absolute proposition permitting the State
to act arbitrarily in the matter of entering into
contract with third parties. We have no doubt that
the Court could not have intended to lay down such
a proposition because Hidayatullah J. who
delivered the judgment of the Court in this case
was also a party to the judgment in Rashbihari
Panda v State of Orissa (Supra) which was also a
decision of the Constitution Bench, where it was
held in so many terms that the State cannot act
arbitrarily in selecting persons with whom to
enter into
76
contracts. Obviously what the Court meant to say
was that merely because one person is chosen in
preference to another, it does not follow that
there is a violation of Article 14, because the
Government must necessarily be entitled to make a
choice. But that does not mean that the choice be
arbitrary or fanciful. The choice must be dictated
by public interest and must not be unreasoned or
unprincipled.”
Next reliance was placed on Viklad Coal Merchants,
Patiala, etc. etc. v. Union of India & others, AIR 1984 SC
95. In that case this Court had to construe section 27A and
28 of the Railways Act and the Court observed:
“Section 28 forbids discrimination by giving undue
or unreasonable preference or advantage in respect
of any particular traffic to any particular person
or any railway administration but this general
prohibition against discrmination is subject to
the overriding power conferred on Central
Government under section 27A. If while giving
effect to the orders of the Central Government
issued under Section 27A, priority is accorded in
the matter of transport of goods consigned to
Central or State Government or class of goods
specified in the general or special order issued
in this behalf, the action of the railway
administration in complying with such special or
general order could not be said as tentamounting
to giving undue or unreasonable preference or
advantage to or in favour of any particular person
or railway administration. What section 28 forbids
is discrimination in the matter of transport of
goods against a class but this is subject to the
permissible classification that would be
introduced by a special or general order issued by
the Central Government in exercise of the power
conferred by Section 27A. It may be recalled that
the Preferential Traffic Schedule according to
Priority `C’ to transport of coal by those
mentioned therein has been issued in exercise of
the power conferred by Section 27A. Therefore, the
submission that petitioners in the matter of
transport of coal are similarly situated with the
Central or State Government or transporters given
priority by general or special order issued under
Section 27A cannot be entertained.”
77
This case is not of much help in the present case. The
facts were materially different in that case. In that case,
the railway authority had to comply with the directions
given by the Central Government which was in the public
interest.
Lastly, the counsel relied upon Madhya Pradesh Ration
Vikareta Sangh Society & Ors. etc etc. v. State of Madhya
Pradesh & Anr. [1982] 1 SCR 750. In that case the question
for consideration was whether the Fair Price Shops in the
State under the Government Scheme should be directly run by
the Government through the instrumentalities of the
Consumers Co-operative Societies as its agents or by retail
dealers to be appointed by the Collector. This Court took
the view that essentially this was a matter of policy to
which the Court is not concerned. This case also is not of
much help in the present case.
In the instant case, the instrumentalities of the State
invited tenders for the supply of fresh buffaloes and cows
milk and, therefore, this case has to be decided on the
basis of bid by the tenderers. There was no question of any
policy in this case. It is open to the State to adpot a
policy different from the one in question. But if the
authority or the State Government chooses to invite tenders
then it must abide by the result of the tender and cannot
arbitrarily and capriciously accept the bid of respondent
No. 4 although it was much higher and to the detriment of
the State. The High Court, in our opinion, was not justified
in dismissing the writ petition in limine by saying that the
question relates to the contractual obligation and the
policy decision cannot be termed as unfair or arbitrary.
There was no question of any policy decision in the instant
case. The contract of supply of milk was to be given to the
lowest bidder under the terms of the tender notice and the
appellant being the lowest bidder he should have been
granted the contract to supply, especially, when he has been
doing so for the last so many years.
In the result, the appeal must succeed. It is
accordingly allowed and the judgment and order of the High
Court dated January 10, 1986 is set aside and the Writ
Petition is allowed and the order of the authorities
rejecting the tender of the appellant and accepting the
tender of respondent No. 4 is quashed. The respondents
authorities are directed to accept the tender of the
appellant. There is, however, no order as to costs.
P.S.S. Appeal allowed.
78