IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 31/01/2003
Coram
The Hon'ble Mr. Justice P. SATHASIVAM
Writ Petition No. 41170 of 2002
and
WPMP No. 60937 of 2002 and WVMP No. 1771 of 2002
M/s. Sanghvi Movers Limited,
having its Regional Office at
No.121, Chennai-Bangalore Road,
Chembarambakkam-602 103,
represented by its AGM (Operations)
Mr. R.K. Ozarkar. .. Petitioner.
-Vs-
M/s. Oil and Natural Gas
Corporation Limited,
Regional Office: Southern Region,
CMDA Building, 8th floor (East Wing),
8, Gandhi Irwin Road, Egmore,
Chennai-8. .. Respondent.
Petition under Article 226 of the Constitution of India, for issuance of a
Writ of Mandamus, as stated therein.
For petitioner:- Mr. T.K. Bhaskar.
For respondent:- Mr. G. Masilamani, Senior
Counsel for M/s. Sarvabhauman Associates.
:ORDER
Messers. Sanghvi Movers Limited, Chembarambakkam, have approached this Court
to issue a writ of mandamus to direct the respondent to renew the contracts
entered into with the petitioner in respect of one Crane with Registration No.
of the Cranes NL-02/D 0691 for the full extension period of one year pursuant
to the tender No. MAS/TPT/HYD. CRANES/TYPE III/KG-CAU/2000-2002
2. The case of the petitioner is briefly stated hereunder:
According to the petitioner, they engaged in the business of hiring Cranes for
the last 14 years. The petitioner company has been performing satisfactorily
in respect of their contracts right from the time of supplying cranes to
respondent company. The cranes supplied by the petitioner have been
functioning in respect of KrishnaGodavari and Cauvery Projects since 1990.
The petitioner company has bid in various tenders and has been awarded
contracts for the said cranes on hire from time to time and on each occasion
the contract period in the tender has been stipulated as 2 +1 years. The
contract period is granted for a period of at least 3 years to enable
successful tenders to offer their services efficiently and to realize the
value of their investments which is substantial. Pursuant to tender
notification No. MAS/TPT/HYD.CRANES/TYPE III/HG CAU/2000-2002, the respondent
company has invited tenders for hiring of diesel hydraulic truck mounted
cranes with capacity of lifting a minimum load of 20 MTS at 3 metres and 12
MTS at 6 Metres operating radius with 11 Metres left from the ground level.
The tender specifications mentioned in the document and the tender was invited
for a total quantity of 14 Nos. cranes for a period of 2 years with extension
of further period of one year at the sole discretion of the respondent. The
period of contract mentioned in Clause 2 of the agreements executed between
the petitioner and the respondent for an initial period of two years which may
be extended by one year in 2 instalments of 6 months each at sole discretion
of ONGC on the same rates, terms and conditions, subject to satisfactory
performance, of Cranes and execution of the contract. The petitioner has been
satisfactorily performing in respect of each of the contracts. The contract
period for the NL 02 D 0691 expired on 2-11-200 2. The respondent extended
the contract for a temporary period of 3 months which period is terminable at
the discretion of the respondent at a lower rate. The respondent has floated
a fresh tender for 17 numbers cranes in respect of the Krishna Godavary and
Cauvery projects even before the contracts with the petitioner have expired.
The respondent has not considered the fact that the petitioner has performed
satisfactorily under the contract and extended the contract for the extended
period of one year. No opportunity has been given to the petitioner to
establish a case for extension of the contract and the respondent has acted
unilaterally and in violation of the principles of natural justice. The
exercise of discretion by the respondent is arbitrary, unfair and unjust. The
petitioner by their letter dated 7-11-2 002 arbitrarily extended the time for
3 months instead of 6 months. The petitioner has invested substantial sums in
respect of the cranes put on hire with the respondent and was quite legitimate
expectation that the contracts could be renewed for the extension period
mentioned in clause 2 of the agreements entered into with the respondent.
However, the respondent has failed to extend the same. Having no other
effective remedy, filed the present writ petition challenging the arbitrary
and mala fide action of the respondent.
3. On 15-11-2002 while admitting the above writ petition, in W.P.M.P.No.
60937/2002, this Court granted interim order to the limited extent, namely,
the respondent shall not finalise the awarding of the contract to any third
party until further orders. Now the respondent has filed W.V.M.P.No. 1771 of
2002 to vacate the said interim order. In the counter affidavit, it is stated
that since the petitioner does not have a legal right of extension of the
contract period, he cannot seek for the issue of Writ of a Mandamus. As per
clause 2 of the contract between the parties, the duration of contract is 2
years initially, the extension for a period of one year in 2 instalments is at
the sole discretion of the ONGC. It is the exercise of this administrative
decisions that is subject matter of challenge in this writ petition and this
Court may not sit in appeal over an administrative decision taken by the
respondent Corporation. The crane bearing No. NL-02D-0691 which is the
subject matter of the present writ petition was taken on lease from the
petitioner’s associate company M/ s. Sanghvi Projects Limited on 7-9-2000 for
a period of 3 years starting from 11-9-2000. The petitioner’s period of
contract with the respondent with regard to the deployment of the above crane
drew to an end on 1-11-2002. Based on the request and the rate offered,
initially the same was extended for a period of 3 months. Thereafter, the
respondent with a team of qualified officers decision not to extend and flow
tenders inviting offers from qualified persons. The injunction restraining
the respondent from awarding the contract with respect to the new tenders for
the period 2002-2004 against the petitioner crane no. NL-02D-0691 is clearly
beyond the scope of the main writ petition. Since the tender for 2002-2004
has been finalised with respect to 3 brand new cranes at Rs.6,989/- and the
letter of intent has been issued in favour of one Sanjib Kakatia on 8-4-2002,
the interim injunction prayed for has become infructuous. Similar writ
petition in W. P.No. 39763/2002 filed by the sister concern of the
petitioner M/s Sanghvi Projects Limited was dismissed by this court on
10-12-2002.
4. In the light of the above pleadings, I have heard Mr. T.K. Bhaskar,
learned counsel for the petitioner and Mr. G. Masilamani, learned senior
counsel for the respondent.
5. The only point for consideration in this writ petition is whether a
Mandamus can be issued, directing the respondent to renew the contract entered
into with the petitioner in respect of one Crane for the full extension period
of one year, pursuant to the tender for 2000-2002?
6. Mr. T.K. Bhaskar, learned counsel for the petitioner, after taking me
through the terms and conditions of the tender and the agreement between the
parties, would contend that the action of the respondent in not extending the
contracts in respect of Crane No. NL-02D-091 for one year with two
instalments is arbitrary, unjust and unfair. He further contended that the
action of the respondent in not exercising its discretion against the contract
amounts to abuse of discretion and bad in law. The respondent has also
deviated from the longstanding policy in extending the contract for the
extended period upon the satisfactory performance by the petitioner. He also
contended that the petitioner was under the legitimate expectation that the
contract in respect of cranes hired by the respondent could be renewed for the
full extension period upon the expiry of the primary contract period.
According to him, in view of the satisfactory performance of the petitioner in
respect of contract, the action of the respondent ignoring their claim is
contrary to public interest and violative of Articles 14, 19and 21 of the
Constitution of India.
On the other hand, Mr. G. Masilamani, learned senior counsel for the
respondent, would contend that in the absence of any legal right of extension
of contract, a Writ of Mandamus cannot be issued. He also contended that
since the respondent Corporation received lower offers during the bid for new
tender floated for 2002-2004, the tender committee after series of
deliberations, decided to use imported cranes to tender which is one of the
essential requirement of fresh tender 2002-2004 and to get the best out of the
market; hence their action cannot be faulted with. He further contended that
this Court exercising jurisdiction under Article 226 of the Constitution, may
not sit in appeal over an administrative decision taken by the Government
Body, more particularly the contract in question is non-statutory falling
purely in the realm of private contract.
7. I have carefully considered the rival submissions.
8. In order to appreciate the contentions raised by both sides, it is useful
to refer Clause (2) of the Agreement dated 6-12-2 000 between the ONGC and the
petitioner which reads as under:
“2. DURATION OF CONTRACT (2 years +1 year)
2.1 The period of contract is from 02/11/2000 to 01/11/2002 for an initial
period of TWO years.
2.2 The period of contract may be extended by one year in 2 instalments of 6
months each at sole discretion of ONGC on the same rates, terms and
conditions, subject to satisfactory performance, of Cranes and execution of
the contract.”
It is clear that the period of contract is initially for 2 years and the same
may be extended for one year in two instalments of six months each at the sole
discretion of the ONGC. It is also clear that the said extension is subject
to sole discretion of the ONGC subject to various other factors namely
satisfactory performance, of Cranes and execution of the contract. In the
light of the terms of agreement, as rightly contended by the learned senior
counsel for the respondent, the extension of one year period in two
instalments of 6 months each rests on the sole discretion of the respondent.
No doubt, the discretion has to be exercised fairly, justly and reasonably.
It is the admitted case of the petitioner that after the expiry of the period
of two years, the contract was extended only for a period of 3 months which is
permissible at the discretion of the respondent at a lower rate. Learned
counsel for the petitioner would contend that having spent huge investment, on
the legitimate expectation that he would be allowed to continue for the full
extended period of one year, the respondent is not justified in limiting the
extended period only for 3 months. In support of his contention that exercise
must be governed by a rule of law, he relied on three decisions in (i) UNION
OF INDIA v. DINESH ENGINEERING CORPORATION ((2001) 8 Supreme Court Cases
491); ( ii) PUNJAB COMMUNICATIONS LTD. v. UNION OF INDIA AND OTHERS ((1999)
4 Supreme Court Cases 727; and (iii) MAHABIR AUTO STORES v. INDIAN OIL
CORPORATION (AIR 1990 Supreme Court 1031). In the light of the said
contention, I have carefully perused the facts in those cases and the dictum
laid down therein. Absolutely there is no doubt about the proposition of law
enunciated therein. In our case, I have already extracted the duration of
contract namely initial period of 2 years and extended period of one year
subject to sole discretion of ONGC on the same rates, terms and conditions,
satisfactory performance of Cranes and execution of contract, etc. It is the
definite case of the respondent that the discretion of not extending the
contract period has been exercised by the ONGC after much deliberation and
after taking into consideration the highly competitive and improved market
condition where crane operators have offered new/imported cranes at lower
rates. It is also stated that after series of deliberations, the
qualifications of the participants was re-cast in order to broaden the vendor
base and to increase the competition. Mr. G. Masilamani, learned senior
counsel for the respondent, by relying on a decision of the Supreme Court in
STATE OF WEST BENGAL v. NIRANJAN SINGHA, reported in (2 001) 2 M.L.J. 24
(S.C), would contend that the action of the respondent inviting fresh bids
cannot be said to be arbitrary and there is no question of applying doctrine
of legitimate expectation. In the said decision, the respondent therein
requested the Executive Engineer concerned for extension of the agency for a
period of another one year in terms of Clause 5 of the agreement having
complied with the conditions stated therein. The appellant therein instead of
extending the period of agency in favour of the respondent, invited fresh
bids; hence a writ petition was filed by the respondent in the High Court
seeking for quashing of notification calling for fresh bids. The learned
single Judge directed for consideration of the representation of the
respondent and ultimately the writ petition was allowed by upholding the claim
of the respondent for renewal of the agreement for another period of one year.
The matter was carried in appeal to the Division Bench. On behalf of the
respondent the contention put forth before the Court was that Clause 5 of the
agreement entered into between the appellant and the respondent, involved an
element of ‘legitimate expectation’ and non-consideration of the same would
amount to arbitrary exercise of the power and, therefore, he learned single
Judge was justified in issuing the writ. The Division Bench upheld the order
made by the learned Single Judge, hence appeal to the Supreme Court.
Disapproving the view expressed by the High Court, the Supreme Court has held,
(para 4)
“4. We may notice that the distinction sought to be made by the High Court
that this is not a case involving grant of a fresh agency but extension of the
existing one does not make much sense. An extension of an agreement or
renewal is granted on the expiry of the period of the existing agreement.
Either the extension or the renewal of the existing agreement may be on the
same terms or on different terms. If it is a case of extension of the
existing agreement on the same terms and conditions and such consideration
gives rise to a question of legitimate expectation being a part of the
concerned agreement, economic consideration of getting higher bid for the same
period would be a relevant consideration. If the Governmental authorities had
found that it would be feasible to have the agency, as in the present case, on
fresh terms by enhancing the amount payable to the Government, it would be a
relevant factor and in such a case it cannot be said that the legitimate
expectation of the respondent had been affected because the public interest
would out-weight the extension of the period of the agreement. The doctrine
of “Legitimate expectation” is only an aspect of Art.14 of the Constitution in
dealing with the citizens in a non-arbitrary manner and thus, by itself, does
not give rise to an enforceable right but in testing the action taken by the
Government authority whether arbitrary or otherwise, it would be relevant.
The decision in FOOD CORPORAITODN OF INDIA v. M/S. KAMDHENU CATTLE FEED
INDUSTRIES, (1993) 1 S.C.C. 71 does not lay down any principle which detracts
from what we gave stated now. In a case where the agency is granted for
collection of toll or taxes, as in the present case, it can easily discerned
that the claim of the respondent for extension of the period of the agency
would not come in the way of the Government if it is economically more
beneficial to have a fresh agreement by enhancing the consideration payable to
the Government. In such an event, it cannot be said that the action of the
Government inviting fresh bids is arbitrary. Moreover, the respondent can
also participate in the tender process and get his bid considered. Hence, we
do not think that the view taken by the High Court can be justified.”
Here, in our case in the counter affidavit the respondent has pointed out new
developed Cranes and reduction in rate by inviting competitive bid, etc.
Apart from these details, I have already referred to the duration of contract
which clearly shows that the period of contract is for two years and the
extension in a period of one year in 2 instalments of 6 months each is at the
sole discretion of ONGC subject to fulfilling certain terms. Though the
petitioner was granted extension for a period of 3 months, in view of the
competitive offers, availability of new model Cranes, the respondent decided
to go for a fresh tender. In such a circumstance, as observed by the Supreme
Court in (2001) 2 M.L.J. 24 (S.C) (cites supra), the proposed fresh tender is
economically more beneficial. In such a circumstance, it cannot be said that
the action of the ONGC inviting fresh bids is arbitrary. As rightly pointed
out, the petitioner can also participate in the tender process and get his bid
considered. Hence, I do not find any valid ground to issue Mandamus as
claimed by the petitioner. It is also brought to my notice that in respect of
similar claim made by the sister concern namely M/s. Sanghvi Projects
Limited, R. Balasubramanian, J., after considering similar contentions,
dismissed W.P.No. 397 63/2002 on 10-12-2002.
9. In the result, I do not find any merit in the claim of the petitioner;
consequently the Writ Petition fails and the same is dismissed. No costs.
Consequently, connected W.P.M.P., and W. V.M.P., are closed.
31-01-2003
Internet : Yes
R.B.
To:-
M/s. Oil and Natural Gas
Corporation Limited,
Regional Office: Southern Region,
CMDA Building, 8th floor (East Wing),
8, Gandhi Irwin Road, Egmore,
Chennai-8.