{"id":87566,"date":"2001-09-18T00:00:00","date_gmt":"2001-09-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/union-of-india-ors-vs-dinesh-engineering-corpn-anr-on-18-september-2001"},"modified":"2018-03-13T08:29:25","modified_gmt":"2018-03-13T02:59:25","slug":"union-of-india-ors-vs-dinesh-engineering-corpn-anr-on-18-september-2001","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/union-of-india-ors-vs-dinesh-engineering-corpn-anr-on-18-september-2001","title":{"rendered":"Union Of India & Ors vs Dinesh Engineering Corpn. & Anr on 18 September, 2001"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Union Of India & Ors vs Dinesh Engineering Corpn. & Anr on 18 September, 2001<\/div>\n
Author: S Hegde<\/div>\n
Bench: N. Santosh Hegde, S N Phukan<\/div>\n
           CASE NO.:\nAppeal (civil) 5624  of  1994\n\n\n\nPETITIONER:\nUNION OF INDIA & ORS.\n\n\tVs.\n\nRESPONDENT:\nDINESH ENGINEERING CORPN. & ANR.\n\nDATE OF JUDGMENT:\t18\/09\/2001\n\nBENCH:\nN. Santosh Hegde & S N Phukan\n\n\n\n\nJUDGMENT:\n<\/pre>\n
(With CA No.5625\/1994)
\nJ U D G M E N T<\/p>\n
SANTOSH HEGDE, J.\n<\/p>\n
\tThese appeals are preferred against the judgment and
\norder dated 15.10.1993 passed by the High Court of Judicature
\nat Allahabad in Civil Miscellaneous Writ Petition No.12355\/93
\nfiled by the first respondent herein. The brief facts necessary for
\ndisposal of the appeals are as follow :\n<\/p>\n
\tThe respondent – M\/s. Dinesh Engineering Corporation –
\n(hereinafter referred to as ‘the writ petitioner’) claims to
\nmanufacture certain spare parts of GE governors used by the
\nIndian Railways to control the speed in diesel locomotives. It is
\nstated that originally the diesel governor was manufactured
\nonly by M\/s. General Electric Company of the United States of
\nAmerica (‘GE’ for short) and till the year 1974, the same was
\nbeing imported as also its spare parts. Thereafter, while
\nstopping the import of governors in regard to the spare parts
\nrequired for replacement in the governors manufactured by
\nGeneral Electric Co., the Railways were approaching the local
\nmanufacturers.\n<\/p>\n
\tOn 9.12.1991, it is stated that a tender was floated by the
\nController of Stores, Diesel Locomotive Works, Varanasi, for
\nsupply of certain items of spare parts for use in GE governors.
\nIt is stated that only the writ petitioner responded to the tender
\nbut its tender was not considered nor was it rejected till
\n23.10.1992 on which date the writ petitioner received a letter
\nfrom the Director, Mechanical Engineering (Tr.), Diesel
\nLocomotive Works, Varanasi, wherein it was informed that the
\nRailway Board had reviewed the policy of purchase of GE-
\nEDC governor spares in the context of sophistication,
\ncomplexity and high degree of precision associated with
\ngovernors. Consequently, its tender was not acceptable to the
\nRailways.\n<\/p>\n
\t  Challenging this decision of the Railways both in regard
\nto the policy purported to have been adopted by the Board as
\nalso the rejection of its tender, the writ petitioner moved the
\nHigh Court seeking a writ in the nature of mandamus
\ncommanding the respondents in the writ petition to finalise the
\noffer of the writ petitioner regarding the tender and also for
\nissuance of a writ of certiorari quashing the letter dated
\n23.10.1992 written by the Director, Mechanical Engineering
\n(Tr.) in regard to purchase of spare parts.\n<\/p>\n
\tThe High Court in the impugned order came to the
\nconclusion that on the basis of the material placed before it that
\nthe writ petitioner was manufacturing spare parts for GE
\ngovernors and was supplying the same to various Divisions of
\nthe Indian Railways who had found it to be satisfactory and, in
\nregard to which, as a matter of fact, some of these Divisions
\nhad also issued certificates of efficiency and appreciation. It
\nalso accepted the plea of the writ petitioner that the spare parts
\nsupplied by it were certified to have given satisfactory service
\nby various Divisions of the Railways like the Central Railways
\netc., and held that the writ petitioner was the sole competitor\t to
\nM\/s. Engineering Devices & Controls (EDC) for the supply of
\nspare parts in regard to GE-governors. It also held that the
\npolicy put forth by railways in its letter dated 23.10.1992
\namounted to creating a monopoly in favour of EDC and the
\nsame was wholly arbitrary and discriminatory. It also rejected
\nthe contention of the Railways that the tender notice dated
\n9.12.1991 was rejected because the same was not in conformity
\nwith the terms of the tender. The High Court also rejected the
\ncontention of the Railways based on Clause 16 of the
\nGuidelines which gave a unilateral right to the Railways to
\nreject the tender without assigning any reason. On the above
\nbasis, the High Court while allowing the writ petition held the
\norders of the Railways dated 14.7.1993 i.e. rejecting the tender
\nof the writ petitioner and the letter dated 23.10.1992 reflecting
\nthe policy of the Railways in regard to purchase of spare parts
\nfor the governors were quashed.\n<\/p>\n
\tAs stated above, it is against this judgment that these
\nappeals have been preferred before this Court. It is to be noted
\nthat this Court having stayed the operation of the impugned
\njudgment of the High Court, in the normal course, these appeals
\ncould have been disposed of as having become infructuous, but
\nthe appellant contended that the issue involved in these appeals
\nis of substantial importance to the Railways and in view of the
\nobservations of this Court while granting ‘leave’ in these
\nappeals, irrespective of the final outcome of the impugned
\ntender in the original writ petition, the question involved
\nrequires consideration by this Court.\n<\/p>\n
\t  It is to be noted that this Court while granting ‘leave’ on
\n12.8.1994 observed : “Since this is a matter which can be
\ndecided on the present set of paper books, no printing is
\nnecessary. The matter is otherwise urgent and requires settling
\nso that the Railways should know how to deal with the matter
\nof the kind. This may be listed in the month of November, 1994
\nsubject to the pleasure of my Lord the Chief Justice. Liberty to
\nmention, if necessary.”\n<\/p>\n
\tAs things would have it, though the matter was listed for
\nhearing starting from 24.1.1995, for various reasons mentioned
\nin the concerned orders the matter was not taken up for hearing
\nuntil the same reached the stage of hearing this day before us.
\nTherefore, we have considered it appropriate to decide these
\nappeals on their merits.\n<\/p>\n
\tMr. P.P. Malhotra and Mr. T.L.V. Iyer, learned senior
\ncounsel appearing for the appellants in these appeals,
\nstrenuously contended that the respondent was a small-time
\nsupplier of spare parts and did not have the necessary expertise
\nand infrastructure for the manufacture of required sophisticated
\nspare parts, therefore, keeping in mind the necessity to have
\ngenuine spare parts required for this sophisticated equipment,
\nthe Railways after taking into consideration all the aspects of
\nthe matter, had taken a policy decision as reflected in its letter
\ndated 23.10.1992 and this being a policy decision, the High
\nCourt ought not to have interfered with the said decision. It was
\nalso contended on behalf of the appellants that the Railways
\nhad the right to choose the supplier of spares bearing in mind
\nthe quality of the goods it wanted to purchase. It is contended
\nthat such right of the Railways becomes all the more important
\nin the purchase of sophisticated items like spare parts to the
\ngovernors which plays a very important role in maintaining
\nsafety in the movement of locomotives. It was also contended
\nthat the High Court was in error in coming to the conclusion
\nthat the policy was an afterthought or that it would create a
\nmonopoly in favour of EDC. It was pointed out that in the letter
\nreflecting the policy, it is clearly pointed out that the Board had
\ndecided to make purchases of these spare parts and meet future
\nneeds of governors from the EDC only till such time as other
\npersons capable of developing such equipment as well as spare
\nparts to the satisfaction of the Railways were available.
\nTherefore, this temporary creation of monopoly, if any, would
\nnot be either unreasonable or arbitrary. According to the
\nappellants, the writ petitioner does not have the requisite
\nexpertise nor the capacity to manufacture a governor or its
\ngenuine spare parts, hence, the High Court ought not to have
\npassed the impugned order.\n<\/p>\n
\tIn regard to the rejection of the offer made by the writ
\npetitioner pursuant to the tender notification, it is stated that the
\nRailways had called for tenders for supply of 98 items which
\nwere required as spare parts for the governors while the writ
\npetitioner had quoted only for 36 items, hence, the offer was not
\nin conformity with the requirement of the tender. It is also
\ncontended that the writ petitioner had not submitted any
\ndrawings or specifications and had also not offered any
\nwarranty for the working of the equipment. In such a situation,
\nit was not obligatory on the part of the Railways to have
\naccepted the tender. Further, the appellants placing reliance
\nupon certain correspondence between the Railways and the writ
\npetitioner also pointed out that the writ petitioner was not in a
\nposition to manufacture the governors as per the requirement of
\nthe Railways for want of necessary infrastructure. Based on
\nthese grounds the appellant contends that it is safer to place
\norders for the spare parts of the governors with an original
\nmanufacturer of governors, and since EDC alone has been
\nmanufacturing governors which are compatible to the GE
\ngovernors already in use with the Railways, there was nothing
\nunreasonable or arbitrary in placing orders with the EDC for
\npurchase of spare parts also till such time as some other parties
\nare ready to make similar supplies.\n<\/p>\n
\tMr. M.D. Adkar, learned counsel appearing for the writ
\npetitioner, seriously challenged the contentions advanced on
\nbehalf of the appellants and supported the judgment of the High
\nCourt. He contended that the policy put forth by the appellants
\nwas only an excuse not to accept the offer made by the writ
\npetitioner for supply of spare parts to the GE governors which it
\nhas been supplying to the Railways for the last over 17 years to
\ntheir satisfaction. He also contended that the policy in question
\nwas put forward only for creating a monopoly in favour of the
\nEDC and since EDC is not the original manufacturer of GE
\ngovernors as they have been manufacturing only their own
\ngovernors they cannot be treated as spare parts’ suppliers of
\noriginal equipment. Negativing the contention of the appellants
\nthat the writ petitioner lacked the expertise or the infrastructure
\nto either manufacture the governors or spare parts for the
\ngovernors, he pointed out that the writ petitioner has been
\nregistered as a supplier of governor drives including mounting
\nand linkage under Item 1029 of the Registration of Firms for
\nitems procured by Railways, and relied upon the document
\nreflecting this position which was produced along with his
\ncounter affidavit before this Court. He also contended that he
\nhas been supplying spare parts to the governors used by the
\nRailways for the last over 17 years and pointed out that various
\nDivisions of the Indian Railways e.g. Western Railway,
\nSouthern Railway, South-Central Railway and also Northern
\nRailway have issued the registration certificates to the said
\neffect. He contended that between the period 1979 and 1993,
\nthe writ petitioner had supplied spare parts for governors to the
\nRailways worth more than 2 crores of rupees, therefore, the
\ncontention of the appellants that the writ petitioner does not
\nhave the necessary expertise or the infrastructure to produce the
\nspare parts for the GE-governors, cannot be countenanced.\n<\/p>\n
\tIn the backdrop of the arguments addressed before us and
\nbearing in mind the findings of the High Court, we will now
\ndiscuss the two issues which arise for our consideration. We
\nwill first take up the question of policy put forth by the
\nappellant as per its letter dated 23.10.1992. For this purpose, it
\nis necessary for us to reproduce in verbatim the relevant part of
\nthat letter which reads as follows  :\n<\/p>\n
     “Board have reviewed the policy on
\nprocurement of CE\/EDC Governor spares in
\nthe context of the sophistication, complexity
\nand high degree of precision associated with
\nthe governor. Keeping in view the need to
\nassure their reliable and quality
\nperformance, it has been decided that :-\n<\/p>\n
(i) GE\/EDC Governor spares should in
\nprocured on proprietary basis from
\nM\/s Engineering Devices and
\nControls Pvt. Ltd. (EDC) who are the
\noriginal equipment manufacturers the
\nsupplies from whom will be supported
\nbe guarantees\/warranties :\n<\/p>\n
(ii) DLW should intensify its efforts to
\ndevelopment alternative sources for
\nmanufacturing of complete governors
\nwhich is fully inter-changeable and
\nmatches in performance with the GE
\ntype Governor so as to generate
\ncompetition;\n<\/p>\n
(iii) The procurement of GE\/EDC
\nGovernor spares on proprietary basis
\nfrom M\/s. EDC would be reviewed
\nonce alternative factory sources of
\nsupply of these Governors become
\navailable.\n<\/p>\n
This issues with the concurrence of the
\nFinance Directorate.”\n<\/p>\n
\tA perusal of the said letter shows that the Board adopted
\nthis policy keeping in mind the need to assure reliability and
\nquality performance of the governors and its spare parts in the
\ncontext of sophistication, complexity and high degree of
\nprecision associated with governors. It is in this background
\nthat in para (i) the letter states that the spares should be
\nprocured on proprietary basis from EDC. This policy proceeds
\non the hypothesis that there is no other supplier in the country
\nwho is competent enough to supply the spares required for the
\ngovernors used by the Indian Railways without taking into
\nconsideration the fact that the writ petitioner has been supplying
\nthese spare parts for the last over 17 years to various Divisions
\nof the Indian Railways which fact has been established by the
\nwrit petitioner from the material produced both before the High
\nCourt and this Court and which fact has been accepted by the
\nHigh Court. This clearly establishes the fact that the decision of
\nthe Board as found in the letter dated 23.10.1992 suffers from
\nthe vice of non-application of mind. On behalf of the
\nappellants, it has been very seriously contended before us that
\nthe decision vide letter dated 23.10.1992 being in the nature of
\na policy decision, it is not open to courts to interfere since
\npolicies are normally formulated by experts on the subjects and
\nthe courts not being in a position to step into the shoes of the
\nexperts, cannot interfere with such policy matters. There is no
\ndoubt that this Court has held in more than one case that where
\nthe decision of the authority is in regard to a policy matter, this
\nCourt will not ordinarily interfere since these policy matters are
\ntaken based on expert knowledge of the persons concerned and
\ncourts are normally not equipped to question the correctness of
\na policy decision. But then this does not mean that the courts
\nhave to abdicate their right to scrutinise whether the policy in
\nquestion is formulated keeping in mind all the relevant facts
\nand the said policy can be held to be beyond the pale of
\ndiscrimination or unreasonableness, bearing in mind the
\nmaterial on record. It is with this limited object if we scrutinise
\nthe policy reflected in the letter dated 23.10.1992, it is seen that
\nthe Railways took the decision to create a monopoly on
\nproprietary basis on EDC on the ground that the spares required
\nby it for replacement in the governors used by the Railways
\nrequired a high degree of sophistication, complexity and
\nprecision, and in the background of the fact that there was no
\nparty other than EDC which could supply such spares. There
\ncan be no doubt that an equipment of the nature of a spare part
\nof a governor which is used to control the speed in a diesel
\nlocomotive should be a quality product which can adhere to the
\nstrict scrutiny\/standards of the Railways, but then the pertinent
\nquestion is : has the Board taken into consideration the
\navailability or non-availability of such characteristics in the
\nspare parts supplied by the writ petitioner or, for that matter,
\nwas the Board alive to the fact that like EDC the writ petitioner
\nwas also supplying the spare parts as the replacement parts for
\nthe GE governors for the last over 17 years to the various
\nDivisions of the Railways. A perusal of the letter dated
\n23.10.1992 does not show that the Board was either aware of
\nthe existence of the writ petitioner or its capacity or otherwise
\nto supply the spare parts required by the Railways for
\nreplacement in the governors used by it, an ignorance which is
\nfatal to its policy decision. Any decision be it a simple
\nadministrative decision or a policy decision, if taken without
\nconsidering the relevant facts, can only be termed as an
\narbitrary decision. If it is so then be it a policy decision or
\notherwise, it will be violative of the mandate of Article 14 of
\nthe Constitution.\n<\/p>\n
\t  It is next contended that EDC is admittedly
\nmanufacturing complete governors by itself and the same being
\ncompatible to the GE-governors in use with the Railways, EDC
\nshould be considered as the supplier of spares for the original
\nequipment. Therefore, it is always safer to buy spare-parts from
\nan original equipment manufacturer than from a manufacturer
\nof only a spare-part. This argument would have been an
\nacceptable argument if EDC was manufacturing GE-governors
\nitself. It is an admitted case that EDC manufactures its own
\ngovernors and not GE-governors nor are they licensed to
\nmanufacture GE-governors. All and any\/sundry governors’
\nmanufacturer cannot be treated as a manufacturer of original
\nequipment for the supply of spares for GE-governors. The
\nstatus of EDC vis-\u00e0-vis the writ petitioner will be the same in
\nregard to the supply of spares to GE-governors. This
\nobservation of ours does not of course amount to giving a
\ncertificate of approval to the writ petitioner as to the spare parts
\nmanufactured by it or that it is compatible with the GE-
\ngovernors. That is a matter to be decided by the experts but
\nsuffice it to say that the writ petitioner cannot be excluded from
\nconsideration for the supply of spare parts to the GE-governors
\non the sole ground that it does not manufacture governors by
\nitself.\n<\/p>\n
\t  Here it is to be noted that substantial number of
\ngovernors used in the locomotives of the Indian Railways are
\nthose manufactured by GE, therefore, the requirements of spare
\nparts are also substantial for replacement in these governors.
\nHence, the Board ought not to have created a monopoly in
\nfavour of the EDC. It is, however, open to the Railways if it
\ncomes to the genuine conclusion that the spare parts
\nmanufactured by the writ petitioner are not acceptable on the
\nground of sophistication, complexity and high degree of
\nprecision then certainly it is for the Railways or for that matter
\nif the terms of offer are not acceptable for justifiable reasons, it
\nwill be open to the Railways to reject the offer of the writ
\npetitioner. But then, none of the above form the basis for
\ncreating a monopoly in favour of the EDC. As held by the High
\nCourt, that creation of this monopoly in favour of the EDC is
\nunreasonable and arbitrary with which we agree.\n<\/p>\n
\tComing to the second question involved in these appeals,
\nnamely, the rejection of the tender of the writ petitioner, it was
\nargued on behalf of the appellants that the Railways under
\nclause 16 of the Guidelines was entitled to reject any tender
\noffer without assigning any reasons and it also has the power to
\naccept or not to accept the lowest offer. We do not dispute this
\npower provided the same is exercised within the realm of the
\nobject for which this clause is incorporated. This does not give
\nan arbitrary power to the Railways to reject the bid offered by a
\nparty merely because it has that power. This is a power which
\ncan be exercised on the existence of certain conditions which in
\nthe opinion of the Railways are not in the interest of the
\nRailways to accept the offer. No such ground has been taken
\nwhen the writ petitioner’s tender was rejected. Therefore, we
\nagree with the High Court that it is not open to the Railways to
\nrely upon this clause in the Guidelines to reject any or every
\noffer that may be made by the writ petitioner while responding
\nto a tender that may be called for supply of spare parts by the
\nRailways. Mr. Iyer, learned senior counsel appearing for the
\nEDC, drew our attention to a judgment of this Court in Sterling
\nComputers Ltd. etc. v. M\/s. M & N Publications Ltd. & Ors.
\n(1993 1 SCC 445)  which has held :\n<\/p>\n
 “Under some special circumstances a
\ndiscretion has to be conceded to the
\nauthorities who have to enter into contract
\ngiving them liberty to assess the overall
\nsituation for purpose of taking a decision as
\nto whom the contract be awarded and at
\nwhat terms. If the decisions have been taken
\nin bona fide manner although not strictly
\nfollowing the norms laid down by the courts,
\nsuch decisions are upheld on the principle
\nlaid down by Justice Holmes, that courts
\nwhile judging the constitutional validity of
\nexecutive decisions must grant certain
\nmeasure of freedom of “play in the joints” to
\nthe executive.”\n<\/p>\n
\t  But then as has been held by this Court in the very same
\njudgment that a public authority even in contractual matters
\nshould not have unfettered discretion and in contracts having
\ncommercial element even though some extra discretion is to be
\nconceded in such authorities, they are bound to follow the
\nnorms recognised by courts while dealing with public property.
\nThis requirement is necessary to avoid unreasonable and
\narbitrary decisions being taken by public authorities whose
\nactions are amenable to judicial review. Therefore, merely
\nbecause the authority has certain elbow room available for use
\nof discretion in accepting offer in contracts, the same will have
\nto be done within the four corners of the requirements of law
\nespecially Article 14 of the Constitution. In the instant case, we
\nhave noticed that apart from rejecting the offer of the writ
\npetitioner arbitrarily, the writ petitioner has now been virtually
\ndebarred from competing with the EDC in the supply of spare
\nparts to be used in the governors by the Railways, ever since the
\nyear 1992, and during all this while we are told the Railways
\nare making purchases without any tender on a proprietary basis
\nonly from the EDC which, in our opinion, is in flagrant
\nviolation of the constitutional mandate of Article 14. We are
\nalso of the opinion that the so-called policy of the Board
\ncreating monopoly of EDC suffers from the vice of non-
\napplication of\tmind, hence, it has to be quashed as has been
\ndone by the High Court.\n<\/p>\n
\tAs stated above, so far as the tender dated 9.12.1991 is
\nconcerned, the same has become infructuous by passage of
\ntime, hence, the relief granted in this regard by the High Court
\nhas also become infructuous. However, we are in agreement
\nwith the High Court that the Board cannot purchase the spare
\nparts under a proprietary basis from the EDC without calling
\nfor tenders and considering the offers received on merits.\n<\/p>\n
For the reasons stated above, we hereby direct that to
\nmeet the future requirements of the Railways in regard to the
\nspares for governors to be used in the diesel locomotives are
\nconcerned, same shall be purchased by a public tender and
\noffers so received shall be considered on their merits without
\nreference to the policy referred to in the letter dated 23.10.1992.
\nAccordingly, these appeals fail and the same are hereby
\ndismissed. No costs.\n<\/p>\n
\t\t\t\t\t\t……………………..J.\n<\/p>\n
\t\t\t\t\t\t(N. Santosh Hegde)<\/p>\n
\t\t\t\t\t\t………………………J.\n<\/p>\n
September 18, 2001.\t\t\t(S N Phukan)
\n1<\/span><\/p>\n
20<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Union Of India & Ors vs Dinesh Engineering Corpn. & Anr on 18 September, 2001 Author: S Hegde Bench: N. Santosh Hegde, S N Phukan CASE NO.: Appeal (civil) 5624 of 1994 PETITIONER: UNION OF INDIA & ORS. Vs. RESPONDENT: DINESH ENGINEERING CORPN. & ANR. DATE OF JUDGMENT: 18\/09\/2001 BENCH: N. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-87566","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nUnion Of India & Ors vs Dinesh Engineering Corpn. & Anr on 18 September, 2001 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/union-of-india-ors-vs-dinesh-engineering-corpn-anr-on-18-september-2001\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Union Of India & Ors vs Dinesh Engineering Corpn. & Anr on 18 September, 2001 - 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