JUDGMENT 1. - Writ Petitioner M/s Ferro Concrete Construction (India) Private Limited (for short, here in after, petitioner company), by this writ petition, accuses the Rajasthan State Electricity Board and its Deputy Chief Engineer (Civil) and the Executive Engineer (Civil), Construction Division No. II, Mahi Hydel Project of distributing state largesse, in the form of giving contract to respondent No. 4 M/s. Dhorajia Construction Company for excavation and slope treatment work of D/S side in Tail Pool and. Tail Pace Channel of Power House-H at Lilwani, Banswara, arbitrarily, unfairly, unreasonably and against public interest. By a Notice No. 13/86-87, dated 23rd March, 1987, published in Rajasthan Patrika on 31st March, 1987, the Executive Engineer, Rajasthan State Electricity Board, Bagidora invited tenders from experienced firms of repute who had executed similar type of work previously for the aforesaid work The petitioner-company, respondent No. 4 and respondent No. 5 participated in the said tender. The tenders were opened on April 30 1987 and it was found that the tender of the petitioner-company was lowest for the execution of the said work with its offer at Rs. 30.10 lakhs as against Rs. 40-28 lakhs of respondent No. 4 and Rs. 35.75 lakhs of respondent No. 5. After opening of the tenders, the Executive Engineer by his letter dated May 8, 1987 called the three tenderers for further negotiations on May 15, 1987 to submit fresh offer on the revised and new schedule of quantities. The new quotations were submitted by three tenderers and again quotation of the petitioner-company was the lowest. The second lower offer was of respondent No. 4 who quoted almost 17 32 per cent higher than the offer of the petitioner-company So far as respondent No. 5 was concerned, it is alleged that he was only a supporting tenderer for respondent No. 4. The Executive Engineer (Civil), Construction Division No. II, Mahi Hydel Project of Rajasthan State Electricity Board (for short, here in after, the Board) by his letter dated May 21, 1987 again called the three tenderers to the negotiation table on June 8, 1987. Mean while, it is alleged that respondent No. 4, who was second lowest tenderer, unilaterally reduced his quotation by more than 20.8 per cent approximately coming to Rs. 10/- lakhs in order to bring his price bid just below the lowest quotation of the petitioner-company. Mean while, it is alleged that respondent No. 4, who was second lowest tenderer, unilaterally reduced his quotation by more than 20.8 per cent approximately coming to Rs. 10/- lakhs in order to bring his price bid just below the lowest quotation of the petitioner-company. The respondent No. 4 thus resorted to unfair and unethical practice. On June 10, 1987 all tenderers were again called for re-negotiations and were asked to submit their final offers for the work. The final offers were given on June 10, 1987 itself and the petitioner-company again stood lowest at Rs. 43,74,671/- as compared to the -final offer of respondent No. 4 at Rs. 44,76,881/-. While answering the quarries of the Executive Engineer made in his letter dated May 21, 1987, the petitioner-company had submitted by its letter dated June 7, 1987 a detailed construction programme along with the list of machinery and other clarifications asked for by the Executive Engineer. The petitioner-company has accused that the Board, its Deputy Chief Engineer (Civil) and the Executive Engineer malafide and with intention to favour the respondent No. 4, took a letter from the respondent No. 4 collusively reducing his lowest offer by about Rs. 1,05,000/- so as to make it lower than that of the petitioner-company and thus obtained the contract for the said work by unfair means. The Board and its engineers took a long period of 40 days in taking a decision in favour of respondent No. 4. It is stated that the Board and its Engineers had no authority or jurisdiction to call for and accept a letter from the respondent No. 4 on July 20, 1987 without affording to the petitioner any opportunity and more so when the final offers had already been given on June 10, 1987 in which all the tenderers had participated and the petitioner-company was lowest in its tender. The petitioner-company has prayed that the award of the contract for the aforesaid work in favour of respondent No. 4 may be quashed and respondents Nos. 1 to 3 may be directed to accept the lowest tender of the petitioner-company for undertaking the aforesaid contract work. 2. A rule was issued to the respondents returnable on August 26, 1987. The petitioner-company has prayed that the award of the contract for the aforesaid work in favour of respondent No. 4 may be quashed and respondents Nos. 1 to 3 may be directed to accept the lowest tender of the petitioner-company for undertaking the aforesaid contract work. 2. A rule was issued to the respondents returnable on August 26, 1987. Appearance was made on behalf of the respondents and counsel for the parties stated on September 1, 1987 that the matter may be heard finally at the admission stage and accordingly the petition was heard on its merits. Mr. K.K. Kapoor, Deputy Chief Engineer, Mahi Hydel Project has filed affidavit dated 2-9-1987 that detailed letters had been issued to all three tenderers containing points of clarification and the tenderers were informed to attend for negotiations on May 15, 1987. The negotiations were held in the chamber of the Chief Engineer of the Board, during which apart from the Chief Engineer, the Deputy Chief Engineer, the Executive Engineer, the Senior Accounts Officer and representatives of three tenderers were present. All the three tenderers gave clarifications on the various issues by their respective letters and they also confirmed the revised 'G' Schedule quantities. It is admitted that respondent No. 4 by its letter dated May 29, 1987 modified its conditions and also revised the rates. The petitioner-company was invited for discussion along with construction planning on June 8, 1987. How ever, the petitioner-company's representatives attended on June 6, 1987 and discussion followed in the presence of the Deputy Chief Engineer and the Senior Accounts Officer. On June 9, 1987 representatives of the petitioner-company were apprised of the modified conditions and revised rates submitted by respondent No. 4 by its letter dated May 29, 1987. During the meeting representatives of the petitioner-company were given an opportunity and chance to give final offer. It was found appropriate that both the petitioner-company and respondent No. 4 should finally submit their offers and should give detailed construction programme and construction planning so that the competent authorities of the Board may judge the competence and capability of the tenderer-contractors to arrive at a decision. It was found appropriate that both the petitioner-company and respondent No. 4 should finally submit their offers and should give detailed construction programme and construction planning so that the competent authorities of the Board may judge the competence and capability of the tenderer-contractors to arrive at a decision. After receipt of the final offer from the petitioner-company and respondent No. 4 on June 10, 1987, offers were examined in detail at the level of the Executive Engineer, the Deputy Chief Engineer and finally by the Chief Engineer and after taking into consideration all relevant factors, which were germane to the contract, the Executive Engineer (respondent No. 3) recommended to the Deputy Chief Engineer (respondent No. 2) that the final offer of the respondent No. 4 be accepted. The Deputy Chief Engineer considered the recommendations of the Executive Engineer and sought certain clarifications and details from the Executive Engineer. After receiving the clarifications and details, the respondent No. 2 examined the offers and made his recommendations to the Chief Engineer on June 30, 1987. The Chief Engineer considered recommendations in detail and ordered that an attempt should be made to further narrow down the gap and that regarding de-watering the interest of the department should be further safeguarded in case quantum of work was reduced. The Chief Engineer also directed that respondent No. 4 should be called on that very day i.e. July 13, 1987 or the next day for discussion. Respondent No. 4 was informed to attend on July 21, 1987 but he actually attended on July 20,1987 and by his letter of the same date modified its earlier offer on the above points. Thereupon the Chief Engineer on July 28, 1987 approved tender of respondent No. 4 and consequently letter of intent and detailed work order was issued to respondent No. 4 on July 30, 1987 and August 7, 1987 respectively. It is shown that after taking into consideration all relevant factors inter alia the nature of the work, the efficiency and competence of the party including past performance and site acquaintance.it was considered to be in interest of the project to allot the work to respondent No. 4. It is stated that respondents Nos. It is shown that after taking into consideration all relevant factors inter alia the nature of the work, the efficiency and competence of the party including past performance and site acquaintance.it was considered to be in interest of the project to allot the work to respondent No. 4. It is stated that respondents Nos. 1 to 3 have acted most fairly and in the interest of project in allotting work to the respondent No. 4 and no favour was shown to it and all the tenderers were given full opportunity for satisfying about their experience, capability and competence to execute the work. 3. In reply filed by respondents Nos. 1 to 3 on August 25, 1987, it has been stated that the contract work included an important item of rock excavation on the river bank. The petitioner company was not able to satisfy respondents Nos. 1 to 3 about his experience to carry out such specialised work of excavation with the help of skilled use of explosives and man power required under the contract. The pre-dominant reason to award the contract to the respondent No. 4 even at higher price had been the expertise of the respondent No. 4 to carry out the specialised excavation work with the skilled use of explosives and man power along with full knowledge and experience of shotcreting requisite under the contract, which the petitioner-company was lacking. It has also been stated that the petitioner-company had not carried out any work on this site and the contract work is located in the river bed and, therefore knowledge of the site and conditions were vital to foresee the problems which may crop up at the site. So far as respondent No. 4 was concerned, he had executed work of tunnels etc. in this area and had in-depth knowledge of site and conditions there. Second lowest tender of respondent No. 4 was accepted so as to avail the expertise of respondent No. 4. The contract rates were reduced subsequently by respondent No. 4 as concession to the Board as insisted to safe-guard the public interest and the money. The Board had acted within its right to award the contract to the second lowest tenderer respondent No. 4 in the best interest of the project without sacrificing the quality and efficiency at the alter of the lowest tender. 4. The Board had acted within its right to award the contract to the second lowest tenderer respondent No. 4 in the best interest of the project without sacrificing the quality and efficiency at the alter of the lowest tender. 4. Respondent No. 4 has emphasised that the type of excavation of rock which was involved in the tender was wholly outside the competence and expertise of the petitioner-company. So far as respondent No. 4 was concerned, he had in the past actually done the entire open-excavation of about 1,35,000 cubic meters worth about a crore of rupees on this site itself. The position of shafts and tunnels required a very skilled expertise in the matter of rock blasting otherwise the whole structure would be in jeopardy and in this matter of excavation from such sensitive rock blasting, the petitioner-company's experience was minimal. 5. Respondents Nos 1 to 3 have also stated that an agreement between the Board and the respondent No. 4 has already been executed on August 14, 1987. The date of the commencement of contract work as per the work order was upto August 28, 1987 and the respondent No. 1 has actually commenced the work on August 10, 1987. Upto the date, contract work worth about Rs. 5/- lakhs has already been carried out by the respondent No. 4. In these circumstances, it is too late in the day to interfere with the contract which has already been awarded to the respondent No. 4 and who has carried out substantial work in pursuance thereof. Respondent No. 4 has pleaded that it has already carried out the excavation work to the tune of 4500 cubic meters worth about Rs. 5,00,000/-, has purchased chain links wire mesh to the extent of 3,000 sq. meters costing about Rs. 2,10,000/- accessories for their crafting machinery to the tune of Rs. 25,000/- and he was obliged to purchase drilling rods and has placed an order with the C.P.T. Halot, Bombay and out of which goods worth Rs. 14,000/- have been received. All the respondents have denied the accusation regarding unfairness, arbitrariness, nepotism and favouritism on the part of the respondents Nos. 1 to 3 in granting the contract for the work in question to respondent No. 4. 6. 14,000/- have been received. All the respondents have denied the accusation regarding unfairness, arbitrariness, nepotism and favouritism on the part of the respondents Nos. 1 to 3 in granting the contract for the work in question to respondent No. 4. 6. It is clear from the notice inviting tenders (Annex.4) that the Executive Engineer of the Board had invited tenders for the work of excavation and slope treatment of D/S side in Tail Pool and Tail Pace Channel of Power House-II, at Lilwani, Banswara. Schedule-I filed along with the writ petition goes to show that in the execution of this work, following items were involved, namely:Excavation, -soil, 2000 M3, -Rock, 10000 M350 mm Shotcrete, , 6200 M2Wire Mesh Link, , 6200 M2Supporting Bolt, , 6200 Nos.R.R. Masonry 1:5, , 100 M3Drainage Holes, , 800 R.M.Mucking/Disilting, , 500 M3Dewatering, , 100000 H.P. Hrs.Grout Anchor, , 3100 K.M.T.A look at the above items of work involved in the contract to be given goes to show that excavation of soil and rock was a preliminary and important work in the contract. Excavation of rock was to the extent of 10000 M3 and it had to be done over tunnel portals. Excavation of rocks had to be taken up immediately and was of vital importance. Expertise in excavation of rocks which also includes the use of explosives had to be done cautiously and efficiently. The other items included 500 shot-creting, wire mesh link, grout anchor, supporting bolt, drainage holes and de-watering, etc. The petitioner-company has alleged in para No. 2 of the writ petition that it was a civil and foundation engineering company specialised in the work of shot-creting guniting, pressure grouting, etc. It also alleged that it had worked worth Rs. 1.5 crores of shot-creting and guniting in the Mahi Hydel Project near Banswara. The petitioner-company has enclosed Schedule No. 2 to the writ petition which is a list of works executed by and in hand of the petitioner-company. A perusal of this list goes to show that the petitioner-company has mainly and principally executed and has in hand works of guniting, grouting and drilling drainage holes. Not a single work has been executed by or is in hand with the petitioner which involves excavation of rocks. Respondents No. 1 to 3 have specifically pleaded that the contract work included an important item of rock excavation on the river bank. Not a single work has been executed by or is in hand with the petitioner which involves excavation of rocks. Respondents No. 1 to 3 have specifically pleaded that the contract work included an important item of rock excavation on the river bank. The tunnels were to be excavated beneath the rock surface. While carrying out the 'excavation above portals, great care, caution and skill was required so that no damage is caused to the existing structure which might result into damage and delay to the whole project. It is thus very clear that specialisation and expertise in rock excavation and skilled use of explosives was a main item in this work contract. The amount quoted by the petitioner company for rock excavation work was Rs. 8,00.000/- out of the total amount of the entire contract work quoted by him at Rs. 39,49,000/-. Respondent No. 4 had quoted for this item an amount of Rs. 11,00,000/-. Thus, about 20 per cent of the entire work involved the work of rocks excavation. 7. The petitioner- company has produced some certificates (Annexures 9, 10 and 11) in order to show that he had executed certain works in the past in Banswara, Kolhapur and Deolond (Madhya Pradesh). All the three certificates produced by the petitioner-company go to show that he had executed work of guniting, grouting and drilling and not of rock excavation. In reply to the show cause notice, respondents Nos. 1 to 3 have produced Annexure R/1 containing a list of work executed by respondents No. 4 at Power House-II site at Banswara. This list goes to show that respondent No. 4 has mainly executed works of excavation, civil works of penstock tunnel, concreting around steel liner in tunnels and drilling of drainage holes. The various documents produced by the petitioner-company only bear out that they are specialised in guniting and grouting work and not in rocks excavation, which was an important component of the particular work of the contract involved in this case. The above conclusions come out from the documents produced by the petitioner-company itself. 8. Then it is pertinent to be noticed that admittedly respondent No. 3 (Executive Engineer) had by his letters dated 8th May, 1987 and 21st May, 1987 (Annexures 5 and 6) required the petitioner to furnish clarifications on various points relevant to this contract work. The above conclusions come out from the documents produced by the petitioner-company itself. 8. Then it is pertinent to be noticed that admittedly respondent No. 3 (Executive Engineer) had by his letters dated 8th May, 1987 and 21st May, 1987 (Annexures 5 and 6) required the petitioner to furnish clarifications on various points relevant to this contract work. The petitioner-company was also required during discussions held on May 15, 1987 to furnish construction planning and programme of the work to be executed. The petitioner-company sent its construction programme along with statement of machineries/equipments proposed to be deployed on the job on June 7 and June 10, 1987 by Annexures 7 and 8 and the appendices enclosed to these annexures. The petitioner-company mentioned about excavation work in the Appendix at page 60 of the paper book. It needs to be reproduced. For excavation work, petitioner-company stated as follows: "Keeping in view the on-set of mansoon latest by 1st week of July, 1987 excavation could be taken in hand for slope excavation upto elevation - 140 which shall begin after about 8-10 days of issue of work order." The procedure to obtain licence for explosives is a time consuming process and we shall endeavour to persue the same, and arrangement to procure explosives shall be made as per site requirements. There is an authorised licence holder agency for explosive material at Banswara who could also be approached for supply of explosive.We will be arranging licence blaster from one of our works to carry out blasting operation.The balance excavation of slope shall begin after monsoon season is over.The river excavation and removal of excavation material shall begin only when water level recedes. A small height coffer dam is also contemplated to be done with excavated material to permit work in the river bed area.It is clear from the above quoted planning programme about excavation mentioned by the petitioner-company itself that it did not possess even a lincence for explosives. It acknowledged that procedure to obtain licence for explosives was a time consuming process and that it will endeavour to persue the same, and arrangement to procure explosives shall be made from an authorised licence-holder agency locally at Banswara. The petitioner-company also mentioned that it will arrange licence blaster from one of its work to carry out blasting operation. It acknowledged that procedure to obtain licence for explosives was a time consuming process and that it will endeavour to persue the same, and arrangement to procure explosives shall be made from an authorised licence-holder agency locally at Banswara. The petitioner-company also mentioned that it will arrange licence blaster from one of its work to carry out blasting operation. Thus the petitioner-company was looking after for explosives and indicated that local licence holder at Banswara could be approached for the purpose. So far as the petitioner-company was concerned, it neither possessed licence for explosives nor any store of explosives material. It could not, therefore, immediately after getting the work contract, carry out blasting operations and excavation of rocks, which work obviously had to precede the other works of shot-creting R.R. Masonary, drainage holes and grouting. On the other hand, respondent No. 4 had carried out several works of rock excavation at Power House-H side at Banswara itself satisfactorily. In the back-ground of these facts, it has to be judged whether respondent No. i acted arbitrarily, unfairly and against public good or public interest in sanctioning the grant of contract for execution of the work-in-question to the respondent No. 4 in preference to the petitioner-company. 9. It must be taken to be the law that where the Government and, for that matter, an instrumentality of the Government or a statutory public corporation, 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 largesse, they cannot act arbitrarily at their sweet will and, like of private individual, deal with any person they please, but their action must be in conformity with standard or norms which are not arbitrary, irrational or irrelevant. The power or discretion of the Government and public bodies in the matter of largesse including award of jobs or contracts, quotas, licences etc., must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government or such public bodies depart from such standard or norm in any particular case or cases, the action would be liable to be struck down unless it can be shown by the Government or public bodies that the departure was not arbitrary, unreasonable or discriminatory (see: observations of Bhagwati, J., in Ramana Dayaram Shetty v. International Airport Authority of India and Ors., 1979 (3) SCC 489 of the reported judjement) 10. The Government, its instrumentalities and public bodies select the recipients for their largesse by different well-known methods. In some cases, the matter is governed or regulated by statute or statutory rules or regulations. In some other cases, and more so where revenue to the Government is involved, highest bid at an advertised and open public auction is adopted as the method. In contracts for execution of public works, method of inviting tenders by publishing public notice is followed. In some very specialised matters and in establishing big industries and establishments, negotiations across the table play a great role. Other methods like first come first served and drawings of lots are recent innovations. 11. Where enabling powers are conferred for public reasons on functionaries coupled with a duty to exercise then the circumstances so demanded by statute or statutory rules or regulations, the functionaries have to exercise the powers and perform the duties in accordance with much statutory provisions. Such powers and duties cannot be shirked or shelved nor could they be evaded. 11. Where enabling powers are conferred for public reasons on functionaries coupled with a duty to exercise then the circumstances so demanded by statute or statutory rules or regulations, the functionaries have to exercise the powers and perform the duties in accordance with much statutory provisions. Such powers and duties cannot be shirked or shelved nor could they be evaded. Farl Cairns L.C. in the House of Lords in Julius v. Lord Bishop of Oxford (1880) 5 AC 214 said: "There may be something in the nature of the thing empowered to be done, something in the object for which it is done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so." Relief to persons imparted unfair treatment or discriminated or victimised by public authorities in matters of grant of licence or lease has been granted by the Supreme Court where public authorises have played fast and loose with the powers vested in them by law (see: Commissioner of Police v. Gordhan Das, AIR 1952 SC 16 (4) State of Assam v. Kesheb Prasad Singh AIR 1953 SC 309 and K.N. Guruswamy v. State of Mysore and Ors., AIR 1954 SC 592 . They were all cases, where grant or distribution of largesses were governed or regulated by Statutes or statutory rules or regulations. 12. So far as the fundamental right under Article 19(1)(g)of the Constitution, which guarantees to all persons the right to carry on any trade or business, is concerned, it was held not to be infringed merely because in pursuance of the so called policy of nationalisation of text-book, the Punjab Government had issued a series of notifications regarding the printing, publication and sale of text books for different classes in the schools of Punjab. His Lordship B.K. Mukherjee, C.J., speaking for the Court, in Ram Jawaya v. State of Punjab, AIR 1950 SC 549 , observed: "There is no fundamental right in the publishers that any of the books printed and published by them should be prescribed as textbooks by the school authorities and if they are once accepted as text books they cannot be stopped or discontinued in future... so utmost that could be said is that there was merely a chance or prospect of any or some of their books being approved as text books by the Government. Such chances are incidental to all trades and businesses and there is no fundamental right guaranting them.... There was nothing but a chance or prospect which the publishers had of having their books approved by the Government, on the other hand the Government had the undisputed right to admit any method of selection they liked and if ultimately decided that after approving the text book, they will purchase a copyright in them from the authors and Ors. provided the latter were willing to transfer the same to the Government on certain terms, we fail to see what right of publishers to carry on their trade or business is affected by it.... The action of the Government may be good or bad. It may be criticised and condemned in the Houses of the Legislature or outside but this does not amount to an infraction of the fundamental right guaranteed by Article 19(1)(g) of the Constitution." 13. Where a Government or public property is sold or an exclusive privilege is granted, usually method adopted is obtaining of bids in public auction. The principal object in selling the exclusive rights is to raise revenue. The Government is guardian of the finances of the State. It is expected to protect financial interest of the State and to see that there is no leakage in its revenue. An auction, as stated in Halsbury's Laws of England, Edition-II Vol 2, Page 69, is a manner of selling or letting property by bids, and usually to the highest bidder by public competition. There is difference between an auction and invitation of tenders. An auction, as stated in Halsbury's Laws of England, Edition-II Vol 2, Page 69, is a manner of selling or letting property by bids, and usually to the highest bidder by public competition. There is difference between an auction and invitation of tenders. An invitation to tender is a mere attempt to ascertain whether an offer can be obtained within such margin as the building owner or employer is willing to adopt it, or, in other words, is an offer to negotiate, an offer to chaffer (see Halsbury's Laws of England, Third Edition, Page 422). 14. It was held by their Lordships of the Supreme Court in Dr. Amarjit Singh Ahluwalia v. State of Punjab and Ors., (1975) 3 SCC 503 that sweep of Articles 14 and 16 of the Constitution is wide and pervasive. These two Articles embody the principle of rationality and they are intended to strike against arbitrary and discriminatory action taken by the State as defined in Article 12 of the Constitution Reference was made to the Rule enunciated by Mr. Justice Farankfurter in Viteralli v. Saton 359 US 535 : 3 Law Edition 2nd 1012 where the learned Judge said: "An executive agency must be rigorously held to the standards by which it professes its actions to be judged.... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must, be scrupulously observed.... This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with that sword." 15. In Sukhdeo Singh and Ors. v. Bhagat Ram, (1975) I SCC 421 Mathew, J., reiterated the rule of Administrative Law stated to be firmly established by Justice Farankfurter in Viteralli v. Saton , (supra). His Lordship Bhagwati, J., in Ramana Dayaram Shetty v. International Airport Authority, (1979) 3 SCC 489 : AIR 1979 SC 1628 laid emphasis that the Government in a Welfare State is the regulator and dispenser of special services and provider of a large number of benefits, including jobs, contracts, licences, quotas, mineral rights etc. The valuables dispensed by the Government take many forms, but they all share one characteristic. The valuables dispensed by the Government take many forms, but they all share one characteristic. He quoted with approval the observations of A.N. Ray, C.J. in M/s. Erusion Equipment and Chemicals Ltd. v. State of West Bengal AIR 1975 SC 266 that the Government is a Government of laws and of men. Democratic form of Government demands equality and absence of arbitrariness and discrimination even where a person enters into contract with Government. The reason is that the activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone but if it does so, it must do so fairly without discrimination and without unfair procedure. In the chain of decisions, next comes the decision in Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir 1980 4 SCC 1 Vol IV The disputes arose on account of the fact that the Government of Jammu and Kahsmir had allotted to 2nd respondent 10 to 12 lacs blazes annually for extraction of resin from the inaccessible 'Chir' forests in Poonch, Reasi and Ramban Divisions of the State for a period of 10 years on the terms and conditions mentioned in the order and the validity of the order was challenged. There were three main grounds for the challenge namely, arbitrariness and acting not in public interest, creating monopoly in favour of 2nd respondent and acting arbitrarily in selecting 2nd respondent for awarding tapping contract without affording any opportunity to others to compete for obtaining such contract. Reliance was placed on behalf of the petitioners upon the decision in Ramana Dayaram Shetty's case (supra). His Lordship Bhagwati, reiterated that if the Govt. awards contract or leases out or otherwise deals with its property or grants any other largesse, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid. The test of reasonableness in forming one's conception of what is reasonable, in all circumstances of a given case. The test of reasonableness in forming one's conception of what is reasonable, in all circumstances of a given case. The directive principles concretise and give shape to the concepts of reasonableness envisaged in Articles 14, 19 and 21 and other articles enumerating the fundamental rights by defining the national aims and constitutional goals, they set forth the standards or norms of reasonableness which must guide and animate the Governmental action. An action which is inconsistent with or runs counter to a directive principle would prima facie incur the reproach of being unreasonable. It thus follows as a necessary corollary that the Government cannot act in a manner which would benefit a private party at the cost of the State; such action would be both unreasonable and contrary to public interest. The Government, therefore cannot give a contract or sale or leases out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so. Such considerations may be that some directive principle is sought to be advanced or implemented or that the contract or property is given not with a view to earn revenue but for the purpose of carrying out a welfare scheme for the benefit of a section of the people deserving it or that the person who has offered a higher consideration is not otherwise fit to be given a contract of the property. 16. It was also laid down in Kasturi Lal Lakshmi Reddy's case (supra) that one basic principle which must guide the court in arriving at its determination on the question of reasonableness and public interest is that there is always a presumption that the Governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. This court cannot lightly assume that the action taken by the Government is unreasonable and without public interest because there are a large number of policy considerations which must weigh necessarily with the Government in taking action and, therefore, the court would not strike down Governmental action as invalid unless it is clearly satisfied that the action is unreasonable or not in public interest. But where it is so satisfied, it would be the plainest duty of the court under the Constitution to invalidate the Governmental action. The second limitation on the discretion of the Government in grant of largesse is that the Governmental action must not be arbitrary or capricious, but must be based on some principle which meets the test of reason and relevance. Thus reasonableness and non-arbitrariness in Governmental action is which lies at the core of our entire constitutional scheme and structure. In the case before their Lordships, it was held that the contract to tap blazes from the 'Chir' forests given to the 2nd respondent were in relation to inaccessible areas within a short supply of 3500 me tones of resin. In these inaccessible areas it was found impracticable to tap through wage contract. The second respondent had undertaken to establish a factory for manufacture of resin, turpentine oil and other derivatives in the State. Previously, the resin extracted were auctioned by the State and it was purchased by the manufacturers having their factories in Hoshiarpur district of Punjab. The respondent No. 2 had undertaken to set up the factory in the State of Jammu and Kashmir and this helped the State in its scheme of rapid industrialisation of the State. The order of the State Government did not handover the tapping of the entire forest area in the State exclusively to the second respondent. It merely allotted 11,85,414 blazes, in the inaccessible areas of Reasi, Ramban and Poonch sub-divisions. Other forest contractors could bid for wage contract in respect of the other blazes which were more than five times in number than the blazes allotted to the second respondent. It merely allotted 11,85,414 blazes, in the inaccessible areas of Reasi, Ramban and Poonch sub-divisions. Other forest contractors could bid for wage contract in respect of the other blazes which were more than five times in number than the blazes allotted to the second respondent. Although no advertisement was issued by the State, the Chief Minister of Jammu and Kashmir had in the course of three speeches delivered by him at Bombay, Calcutta and New Delhi invited entrepreneurs to set up industries within the State with a view to bringing about rapid industrialisation and economic development of the State. The speeches were widely advertised in the newspapers and four entrepreneurs made their respective offers. It was held that it was correct to say that the petitioners had no opportunity to make the offer. From the terms and conditions of the contract or the surrounding circumstances, it could not be brought about that the State had acted maladife or prompted by improper and corrupt motive or in order to promote the private interest of some one at the cost of the State. The order of the Government was held to be reasonable and in the interest of the State. The writ petition was accordingly dismissed. 17. His Lordship Bose, J. in State of Assam v. Keshab Prasad Singh AIR 1953 SC 309 , had also said that there is an ancient presumption under Section 114, illustration (h), Evidence Act, dating from at least 1872, that official acts have been regularly performed. His Lordship Bose, J. observed: "Strange as it may seem this applies to Government as well as to lesser bodies and officials, and ancient though it is, the rule is still in force. True, the presumption will have to be applied with caution in this case but how ever, difficult the task, it is our duty to try and find a lawful origin for as many of the acts of the appellant Government as we can." 18. In Ram and Shyam Co. v. State of Haryana and Ors., AIR 1985 SC 1147 : 1985) 3 SCC 267 , on which much reliance was placed by the learned Counsel for the petitioner-company, at an auction Ram and Shyam Company gave the highest bid of Rs. 1,52,000/-per annum for Sarai Khawaja Plot No. 2. The Presiding Officer conducting the auction accepted the bid but the State Government did not confirm the same. 1,52,000/-per annum for Sarai Khawaja Plot No. 2. The Presiding Officer conducting the auction accepted the bid but the State Government did not confirm the same. A fresh auction was notified to be held. In that fresh auction Ram and Shyam company participated and gave the bid for the same plot at Rs. 3,87,000/- for a period of three years. The Presiding Officer accepted the bid and the State Government declined to confirm it also. Respondent No. 4 wrote a letter to the Chief Minister, Haryana State stating inter alia that the bidders at the auction have formed a syndicate and want to monopolies the business by not out bidding each other so that the State gets uneconomical rent/royalty. It was also stated that goondas antisocial elements are assisting those monopolists/bidders and successfully pushed out a party like respondent No. 4. Respondent No. 4 further made an offer that if the contract for a period of five is given to him in respect of the plot, he was willing to pay Rs. 4,50,000/- per year. This offer was promptly accepted by the Chief Minister. The appellant alleged that respondent No. 4 had participated in the auction and then made a false allegation against the appellant whose bid was the highest and without giving him opportunity, the offer of respondent No. 4 was accepted which had been denied equality of opportunity to the appellant in the matter of distribution of the State largesse. What happened in Ram and Shyam Company's case was that it was urged on behalf of the State of Haryana that the Supreme Court should not assist the syndicalists to join bands to deprive the State of its legitimate revenue. The question posed was: "If the court interferes and quashes the grant in favour of the fourth respondent, the only option open to the court would be to direct a fresh auction." The Attorney General posed the further question that if at the time of re-auction the highest bid does not reach upto Rs. 4,50,000/- per annum for which the lease granted to the fourth respondent, would the Court make good the loss. The Supreme Court asked the counsel for the appellant whether the. appellant was willing to make an affidavit incorporating there in that if the highest bid at a re-auction if the court so directs, falls short of Rs. 4,50,000/- per annum for which the lease granted to the fourth respondent, would the Court make good the loss. The Supreme Court asked the counsel for the appellant whether the. appellant was willing to make an affidavit incorporating there in that if the highest bid at a re-auction if the court so directs, falls short of Rs. 4,50,000/-, the appellant would agree and undertake to accept the contract at the value of Rs. 5,50,000/- per annum. Such an affidavit was immediately filed by the appellant. What transpired was that the offers and counter-offers were made before the court and ultimately the appellant company made its offer at Rs. 25 lacs. Rule 28 of the Punjab Minor Minerals Concession Rules, 1964 applicable to the State of Haryana provided that contracts for extraction of the minor mineral may be granted by the Govt. by auctioning or tendering for a maximum period of five years. The amount to be paid annually by the contractor to the Government should be determined in auction or by tender to be submitted for acceptance by the authority competent to grant the contract. Rule 29 conferred power on the Presiding Officer to reject or accept any bid or tender without assigning any reason to the bidders or tenderers. How ever, where the highest bid or tender was rejected, the reason was to be reported to the Government- It was further provided that no bid shall be regarded as accepted unless confirmed by the Government Rule 58 conferred power to relax any of the provisions of the Rules in the interest of mineral development or better working of the mine. His Lordship Desai, J. stated that undoubtedly Rule 28 permitted contract for winning mineral to be granted by the Government by auction or tender. He observed: "It is equally true that according to the State Government, the highest bid did not represent the market price of the concession. It is open to the State to dispose of the contract by tender. Even here the expression 'tender' does not mean a private secret deal between the Chief Minister and the Officer.... If it was intended by the use of the expression 'tender' in Rule 28 that contract can be disposed of by private negotiations with select individual, its validity will be open to serious question. The language ordinarily used in such rules is by public auction or private negotiations. If it was intended by the use of the expression 'tender' in Rule 28 that contract can be disposed of by private negotiations with select individual, its validity will be open to serious question. The language ordinarily used in such rules is by public auction or private negotiations. The meaning of the expression private negotiation must take its colour and prescribe its content by the words which precede them. And at any rate disposal of the State 'property in public interest must be by such method as would grant an opportunity to the public at large to participate in it, the State reserving to itself the right to dispose it of as best subserve the public deal. Viewed from this angle, the disposal of the contract pursuant to the letter by the fourth respondent to the Chief Minister is objectionable for more than one reason.... The highest bidder, whose bid was rejected on the ground that the bid did not represent the market price, was not given an opportunity to raise his own bid when privately a higher offer was received.... Application of the minimum principles of natural justice in such a situation must be read in the statute and held to be obligatory. When it is said that even in administrative action, the authority must act fairly, it ordinarily means in accordance with the principles of natural justice variously described as fair play in action. That having not been done, the grant in favour of the fourth respondent must be quashed." 19. The learned Counsel for the petitioner-company also referred to the decision in Chaitanya Kumar and Ors. v. State of Karnataka and Ors., AIR 1986 SC 825 : (1986) 2 SCC 594 . Under the Karnataka Excise (Bottling of Liquor) Rules, as they stood at the relevant time, bottling licences could only be granted to persons already connected with the liquor trade. But neither the advertisement confined its invitation to such persons only, nor the Excise Commissioner took into account that criterion while recommending the eight persons for the contract. The Excise Commissioner excluded from consideration for the award of the bottling contracts those persons who were eligible for the grant of bottling licences under the rules. But neither the advertisement confined its invitation to such persons only, nor the Excise Commissioner took into account that criterion while recommending the eight persons for the contract. The Excise Commissioner excluded from consideration for the award of the bottling contracts those persons who were eligible for the grant of bottling licences under the rules. His Lordship O. Chinnappa Reddy, J., speaking for the court, stated that the Excise Commissioner excluded from consideration for the award of the bottling contract's those persons who were eligible for the grant of the bottling licences and recommended such persons as were not eligible for the grant of bottling licences under the rules, an unusual, wilful and perverse way of exercising the powers of distributing state largesse. He observed that even if the award of the bottling contract was not at the expense of the exchequer there could be no question that what was done was the distribution by the State of favours loaded with bounty by way of enabling the recipients of the favours to earn enormous profits. The contention was advanced on behalf of the appellant that the appellant may be permitted to continue to work for some reasonable time so that the heavy investments made by them may not go waste. This request was rejected. On the basis of those observations, it was urged by the learned Counsel for the petitioner-company that respondent No. might have started the work and also executed a part of the work by making investments, that should not prevent this court from quashing the contract granted to the respondent No. 4. 20. The learned Counsel for the petitioner-company next relied upon the decision in Harminder Singh v. Union of India AIR 1986 SC 1557 . In this case tenders were invited for supply of fresh buffalo and cow milk. The appellant who was eligible and had been supplying milk, filed tenders but it was in respect of pasteurised milk and not fresh milk. The milk supplied by the Government Milk Scheme also required re-pasteurization which entailed the additional cost. The appellant's tender was the lowest but tender of the Government Milk Scheme was accepted. The appellant who was eligible and had been supplying milk, filed tenders but it was in respect of pasteurised milk and not fresh milk. The milk supplied by the Government Milk Scheme also required re-pasteurization which entailed the additional cost. The appellant's tender was the lowest but tender of the Government Milk Scheme was accepted. His Lordship R.B. Mishra, J. observed as follows: "In the instant case, the instrumentalities of the State invited tenders for 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 adopt a policy different from the one in question. But if the authority or the State Government chooses to invite tender then it must abide by the result of the tender and cannot arbitrarily and capriciously accept the bid of the Milk Scheme although it was much higher and to the detriment of the State. 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. 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." 21. The decision in Chenchu Rami Reddy v. The Government of Andhra Pradesh, AIR 1986 SC 1158 , related to sale of property belonging to chad-able endowment by private negotiation. The Government sanctioned sale of nath land by private negotiation for Rs. 20 lacs to respondent without recording reasons while appellants offered to purchase the land for Rs. 80 lacs and to deposit Rs. 20 lacs in the court as earnest money. It was held by his Lordship Thakkar, J. that the authorities exercising the powers under the Addhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act (17 of 1966) must not only be most alert and vigilant in such matters but also show awareness of the ways of the present day world as also the ugly realities of the world of today. They cannot afford to take things at their face value or make a less then the closest-and-best attention approach to guard against all pitfalls. Those who are willing to purchase by private negotiations can also bid at a public auction. Why would they feel shy or be deterred from bidding at a public auction? Why then permit sale by private negotiations which will not be visible to the public eye and may even give rise to public suspicion unless there are special reasons to justify doing so? 22. The question also came for consideration in Brij Bhusan and Anr. v. State of Jammu and Kashmir and Ors., AIR 1986 SC 1003 . The dispute related to the validity of three orders of the State of Jammu and Kashmir where by it sanctioned supply of crude also resin at the rate 9,000 tonnes per annum to respondent No. 4, 4000 tonnes per annum to respondent No. 2 and 4000 tonnes per annum to respondent No. 3 at rate of Rs. 260/-per quintal. Validity of these three orders were challenged. In State of Jammu and Kashmir, the tapping operations were entrusted by the State Government to private contractors since 1973 and majority of these private contractors were members of Hoshiarpur Rosin Manufacturers Association. The contractors for tapping which were given to the private contractors were of three types and the net result of giving these contracts was that out of total production of oleo resin, about 50% remained with the State Government. The State Government had its own three units in the public sector for manufacture of resin and turpentine which needed oleo resin out of the quantities remaining with the State Government. Out of these three units, one was closed while two other units at Rajouri and Miran Saheb utilised 5,000 tonnes and 2000 tonnes of oleo resin. The State Government was thus left with a surplus of about 11 to 12 thousand tonnes of oleo resin after meeting the needs of its own public sector units and the State Government was regularly auctioning this balance quantity of oleo resin remaining with it which was being purchased by the members of the Hoshiarpur Rosin Manufactures Association. The State Government was thus left with a surplus of about 11 to 12 thousand tonnes of oleo resin after meeting the needs of its own public sector units and the State Government was regularly auctioning this balance quantity of oleo resin remaining with it which was being purchased by the members of the Hoshiarpur Rosin Manufactures Association. What was happening was that these purchasers used to form syndicates with a view of forcing down the prices and corning oleo resin at low prices The State Government found that a large quantity of oleo resin produced with the State was going out of the State, it decided to take steps to promote industries based on oleo resin available in the State and to embark upon a massive programme of industrialization in the State. Negotiations were started by the State Government with respondent Nos. 2, 3 & 4 for setting up industries based on oleo resin. Each of the respondents in the course of negotiations insisted that he would be prepared to set up factories for manufacturing resin and turpentine derivatives with the latest machinery only if a continuous supply of oleo resin was assured to them by the State Government. The State Government with a view to promote industrial development in the State and ensure proper utilisation of the raw material, passed the impugned orders. Following the decision in Kasturi Lal Lakshmi Reddy's case (supra) that there was nothing at all to show that the State acted malafide or out of improper or corrupt motive or in order to promote the private interest of some one at the cost of the State. The State Government had taken a policy decision not to allow the export of oleo resin but to give it only for industries set up within the State. More over there could be no question of the State Government trying to secure the highest prices from respondents Nos. 2, 3 & 4 since the sale of oleo resin to them under the impugned orders was not a sale simpliciter but it was a sale for the purpose of feeding the factories to be set up by them. Dealing with the argument regarding arbitrariness, it was held that the respondents Nos. 2, 3 & 4 had themselves taken the initiative and provided they were assured definite supply of oleo resin every year. The petitioner had not made similar offers. Dealing with the argument regarding arbitrariness, it was held that the respondents Nos. 2, 3 & 4 had themselves taken the initiative and provided they were assured definite supply of oleo resin every year. The petitioner had not made similar offers. It was observed that it would be more unrealistic to insist on such a procedure particularly in the area like Jammu and Kashmir which was not yet industrially developed and the State was free to negotiate with private entrepreneurs for providing resources and other facilities for setting up the industry and that there was nothing to substantiate malafide or improper or corrupt motive and intention to promote private interest on the cost of the State. 23. Reference may also be made to the decision in Sachidanand Pandey and Anr. v. State of West Bengal and Ors., (1987) 2 SCC 295 . Since the city of Calcutta was lacking in sufficient five star hotel amenity to attract tourist, the West Bengal Government was equally anxious to make available land in suitable locations in Calcutta for this purpose. In response two leading hoteliers viz. ITDC & Taj Group of Hotels proposed to construct five star hotel in Calcutta. Finally cabinet took a decision to grant a ninety-nine years lease of the land to the Taj Group of Hotels. One of the arguments advanced before the Supreme Court on behalf of the appellant was that even if the Government had power to transfer the land, certain norms and procedures had to be observed and nothing could be done which would result in loss to the public exchequer. It was contended that it was necessary either to hold a public auction or to invite tenders at least from the limited class of persons interested in utilising the land for the purpose for which it was proposed to be transferred. Reliance was placed upon the various decisions of the Supreme Court already discussed above. It was held by the O. Chinnappa Reddy, J. that the very nature of the construction and establishment of a five star hotel is indicative of a requirement of expertise and sound financial position on the part of those who might offer to construct and establish them. The decision taken by the All India Tourism Council was an open decision well known to everyone in the hotel business. The decision taken by the All India Tourism Council was an open decision well known to everyone in the hotel business. Yet no one except the ITDC and the Taj Group of Hotels had come forward with any proposal. They had it in the record that the Oberoi Group of Hotels already had a five star hotel in Calcutta while the Welcome Group of Hotels were making their own private negotiations and arrangements for establishing a five star hotel. In the circumstances, particularly in the absence of any leading hoteliers coming forward, the Government of West Bengal was perfectly justified in entering into negotiations with the ITDC and the Taj Group of Hotels instead of inviting tenders. There was nothing discriminatory in the procedure adopted since no other leading hotelier had shown any inclination to come forward. Tenders and auction were most impractical in the circumstances. The principle laid down in Kasturi Lal Lakshmi Reddy's fully justified the action of the West Bengal Government in not inviting tenders and not holding public auction. In para 40 of the reported judjement, his Lordship observed: "On consideration of the relevant cases cited at the bar, the following propositions may be taken as well established: State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is an important as doing justice. Nothing should be done which gives an appearance of bias jobbery or nepotism." 24. Applying the above tests, it was held that the Government of West Bengal did not act with probity in not inviting tenders or in not holding a publication but negotiating straightway at arm's length with the Taj Group of Hotels. 25. We may refer to the case of Trilochan Mishra v. State of Orissa and Ors. Applying the above tests, it was held that the Government of West Bengal did not act with probity in not inviting tenders or in not holding a publication but negotiating straightway at arm's length with the Taj Group of Hotels. 25. We may refer to the case of Trilochan Mishra v. State of Orissa and Ors. 1971 (3) SSC 153 This was a Constitution Bench judjement in which the validity of certain rules framed under the Orissa Kendu Leave (Control of Trade) Act, 1961 were challenged. His Lordship Mitter, J. observed: "With regard to the grievance that in some cases the bids of persons making the highest tenders were not accepted, the facts are that persons who had made lower bids were asked to raise their bids to the highest offered before the same were accepted. Thus there was no loss to Government and merely because the Government preferred one tender to another, no complaint can be entertained. Government certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. More over, the Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tenderer." 26. Reference may also be made to the decision in Pursotama Ramanata Quenim v. Makan Kalyan Tandel and Ors., (1974) 2 SCC 169 . This case related to the leasing out of a distillery to the members of the public for manufacture of country liquor. The Finance Secretary for the Union Territory of Goa, Daman and Diu invited tenders on behalf of the President of India from the public for the lease of the said distillery. Clause 7 of the terms and conditions of the tender stated that the highest tender shall ordinarily be accepted but the Government reserves the right to select any tender or reject all tenders without assigning any reason therefor. Pursuant to this notice, the appellant and respondent No. 1 submitted closed tenders to the Government. When the tenders were opened, it was found that the tender of respondent No. 1 for an amount of Rs. 3,51,345/-was the highest, while that of the appellant for Rs. Pursuant to this notice, the appellant and respondent No. 1 submitted closed tenders to the Government. When the tenders were opened, it was found that the tender of respondent No. 1 for an amount of Rs. 3,51,345/-was the highest, while that of the appellant for Rs. 3,25,000/- was second. There was a third tender also, but that tender was lowest. As respondent No. 1, whose tender was for the highest amount, did not receive any communication regarding the acceptance of the standard, he wrote a letter to the Finance Secretary calling upon him to accept the tender. Respondent No. 1 then learnt that the distillery in question had been given on lease to the appellant for Rs. 3,52,345/-i.e. Rs. 1000/- more than the amount mentioned in the tender of respondent No. 1. Respondent No. 1, therefore, filed a writ petition to quash the grant of lease in favour of the appellant. The Judicial Commissioner held that the act of the Government in giving a lease of the distillery to the appellant for Rs. 3, 52, 345/- i.e. Rs. 1000/-more than the highest hid, by a private deal was not countenanced. His Lordship Khanna, J. delivering the judjement on behalf of the Court, relying upon the decision in C.K. Achuthan v. State of, Kerala and Ors., AIR 1959 SC 490 Trilochan Mishra v. State of Orissa, (1972) 2 SCC 36 State of Orissa v. Harinarayan Jaiswal, (1972) 2 SCC 36 that a condition like that contained in Clause 7 reproduced above is not violative of Article 14 of the Constitution and that in matters relating to contracts with the Government, the latter is not bound to accept the tender of the person who offers the highest amount. It was contended on behalf of the respondent No. 1 that there must have been some negotiations between the Government and the appellant, as a result of which the appellant has raised his offer so that it might exceed that of respondent No. 1. His Lordship stated that this may have been so but it was apparently with a view to ensure that the pecuniary interest of the Government did not suffer as a result of the rejection of the tender of respondent Nor 1. His Lordship distinguished the decision in Rashbihari Pande v. State of Orissa, (1969) I SCC 414 and in K.N. Guruswamy v. State of Mysore (supra). His Lordship distinguished the decision in Rashbihari Pande v. State of Orissa, (1969) I SCC 414 and in K.N. Guruswamy v. State of Mysore (supra). It was stated that no allegations were made in the writ petition by respondent No. 1 that the act of the authorities in the grant of lease of distillery was malafide and nor the act had been shown to be vitiated by any such arbitrariness as should call for any interference by the Court. 27. A review of the above decision leads to the conclusion that there are two limitations imposed by law which structure and control any discretion of the Government in grant of distribution of the Government largesse: (1) in regard to the terms on which largesse may be granted; (2) in regard to the persons who may be recipients of such largesse, 24. The Government and its instrumentalities cannot act arbitrarily, capriciously or in an unprincipled manner They have to exercise the constitutional power for the public good. Every action taken by the Government must with stand the test of reasonableness and rationality. Public interest is paramount consideration. There should be fair play in action. Public authorities entrusted with contracts involving public element should not resort to favourtism, nepotism and jobbery. 28. Guided by these basic fundamental principles, the case of the petitioner-company has to be examined. While doing so, the ancient rule of presumption that the official acts have been regularly performed even in relation to the Government contracts as laid down in State of Assam v. Keshab Prasad Singh (supra) by his Lordship Vivian Bose, J. and reiterated by Bhagwati, J. in Kastoori Lal Laxmi Reddy's case (supra) have to be kept in mind. There is always a presumption that the Government action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting any reasonableness or is not in public interest. This burden is heavy one and has to be discharged to the satisfaction of the court by proper, and adequate material. The Court cannot lightly assume that the action taken by the Government or its instrumentalities is unreasonable or without public interest. The Court will not strike down the action unless it is clearly satisfied that the action is unreasonable and not in public interest. The Court cannot lightly assume that the action taken by the Government or its instrumentalities is unreasonable or without public interest. The Court will not strike down the action unless it is clearly satisfied that the action is unreasonable and not in public interest. It is only when it is satisfied that the action is unreasonable and not in public interest that it would be its plainest duty under the Constitution to invalidate the action. The nature of contract and various items involved in the execution of the contract have already been discussed in detail in the earlier part of this judjement. It was a case where the Executive Engineer of respondent No. 1 had invited sealed tenders from recognised contractors for the work of excavation and slope treatment of D/S side in Tail Pool and Tail pace channel of Power House-II at Lilwani, Banswara. Three tenderers were in the field. The lowest tender was of the petitioner company at Rs. 30,10,000/-. The tender amount of respondent No. 4 was Rs. 40,28,000/-. The tender of respondent No. 4 was for an amount about Rs. 10 lacs higher than that of the petitioner-company. It is an admitted case that after the opening of the tenders, the Executive Engineer called all the three tenderers for further negotiations on May 15,1987 to submit fresh offers on the revised and new schedule of quantities. There is no controversy regarding the revised offer taken from the tenderers with respect to revised and new schedule of quantities. It is admitted fact that quantities were revised. Revised tenders were submitted by three tenderers. The petitioner-company submitted tender quoting an amount of Rs. 49,03,440/- and respondent No. 4 quoted the amount at Rs. 57,35,280/-Clearly the revised quantities made a difference of about Rs. 10,00,000/-.In the revised tender also, the quotation of the petitioner-company was lowest and the next lower was of respondent No. 4. There was a difference of Rs. 8,31,840/-between the total amount quoted by the petitioner-company and that quoted by respondent No. 4. Soon after 15th May, 1987, the Executive Engineer had written letter to the petitioner-company stating that during the course of discussion on 15th May, 1987, it had assured to furnish construction planning and programme of works. The petitioner-company was reminded to send the come. 8,31,840/-between the total amount quoted by the petitioner-company and that quoted by respondent No. 4. Soon after 15th May, 1987, the Executive Engineer had written letter to the petitioner-company stating that during the course of discussion on 15th May, 1987, it had assured to furnish construction planning and programme of works. The petitioner-company was reminded to send the come. The petitioner-company was also requested to furnish a statement regarding machines and equipment which it would deploy for the work matching its construction programme indicating periods. The petitioner-company was required to attend the office of the Chief Engineer on 8th January, 1987 along with the details asked for. The petitioner-company submitted the construction programme and statement of machineries/equipment proposed to be deployed on June 7, 1987 as per Appendix A and B enclosed to its letter Annexure 7. It may be mentioned that before 8th June, 1987 on which the petitioner-company was asked to attend the office of the Chief Engineer, there was an offer from the side of respondent No. 4 made on 29th May, 1987 that it was ready to reduce its offer by Rs. 10,64,019. Thus the unilateral offer of respondent No. 4 brought his tender amount of Rs. 46,58.231/-as against the total tender amount of the petitioner-company at Rs. 49,03.440/-. This made respondent No. 4 as the lowest tenderer. This unilateral reduction by respondent No. 4 was not concealed from the petitioner-company and the tenderers were called upon the negotiation table again. The petitioner-company was apprised that respondent No. 4 was ready to make reduction in amounts quoted by it for excavation rock, wire mesh, dewatering, grout anchor, pocket filling by shotcrete and price escalation. It cannot be said that respondents Nos. 1 to 3 had been unfair towards the petitioner-company. They clearly disclosed to the petitioner-company that respondent No. 4 was ready to reduce its rates on the above items and the total deduction offered by him was of Rs. 10,64, 019/-. All the three tenderers were given an opportunity to give their final offer. All the three tenderers gave their final offer on 10-6 1987. The final offer of the petitioner-company was lowest at Rs. 43,74,671/-. Respondent No. 4 gave final offer at Rs. 44,76,881/- Thus the final offer of the petitioner-company was to an amount of Rs. 1,02,210/- lesser than that quoted by respondent No. 4. All the three tenderers gave their final offer on 10-6 1987. The final offer of the petitioner-company was lowest at Rs. 43,74,671/-. Respondent No. 4 gave final offer at Rs. 44,76,881/- Thus the final offer of the petitioner-company was to an amount of Rs. 1,02,210/- lesser than that quoted by respondent No. 4. Thus at the final offer also, the petitioner-company was the lowest tenderer. 29. As already stated, the petitioner company had furnished its construction programme and the statement of machineries/equipment proposed to be deployed on the job. There was no mention of explosives in annexure to Appendix 'A". For excavation work, the petitioner-company mentioned in the enclosure to his letter dated 10th June, 1987 at page 60 of the paper-book that the procedure to obtain licence for explosives is a time consuming process and they will endeavour to pursue the same and arrangement to procure explosives shall be made as per site requirements. It was further stated that there was an authorised licence-holder agency for explosives material at Banswara who could also be approached for supply of explosives. They also wrote that they will be arranging licence blaster from one of their works to carry out blasting operation. They wrote that excavation to be taken in hand for slope excavation upto elevation 140 which shall begin after about 8-10 days of issue of work order. The balance excavation of slope shall be taken after mansoon season was over. The river bed excavation and removal of excavation material shall begin only when water level recedes. A small height coffer dam was also contemplated to be made with excavated material to permit work in the river bed area. It is to be noted that according to the tender, the period of completion of work was six months including the rainy season. This clarification about excavation work given by the petitioner- company was bound to throw a doubt in the mind of respondents Nos. 1 to 3 about the competence and expertise of the petitioner-company to carry out the excavation work of rocks, which work was about 20% of the total amount tendered and the excavation work was to be started first before other items of the work could be carried out. The petitioner did not possess licence for explosives. It did not also possess explosives. It further had no licence blaster. The petitioner did not possess licence for explosives. It did not also possess explosives. It further had no licence blaster. According to it, balance excavation of slope could begin after monsoon season was over which meant postponement of excavation work by about four months, out of the total duration of six months of the contract. 30. The contract was finally to be approved by the Chief Engineer of RSEB. The papers were submitted by the Executive Engineer to the Deputy Chief Engineer. It was noted by the Executive Engineer in Annexure R-2R that it was revealed during the discussions that the petitioner firm had not executed rock excavation work on large scale and they lacked such experience. With regard to respondent No. 4, it was noted that it had executed open excavation, tunnel excavation and shaft excavation with drilling and shotcreting work at Power House-II, complex. Performance of the previous works of respondent No. 4 had been satisfactory and hence they possessed proven competence for both excavation and shotcreting. It was also noted that respondent No. 4 possesses licence and other arrangement for explosives and, therefore, they could take up excavation work immediately. As against that, the petitioner-company had yet to arrange for any agency for doing the excavation work and it was to be dependent on another agency. It was made clear unless excavation work was expedited and done properly, the drilling and shot-creting work could not be taken up. Excavation work was to be done over tunnel portland and, therefore this work was required to be done cautiously and efficiently so that any risk was avoided. Thus experience in excavation work was of vital importance. When the matter came before the Deputy Chief Engineer, he referred back the matter to the Executive Engineer with the remarks that as the rock blasting needs care and pre-caution, this aspect may be examined keeping in view the experience on this particular job. A report of the quality of the work done was also called for. The Executive Engineer re-submitted the case and noted that respondent No. 4 had been working at Power House-II Complex since 1981 and executed major works of excavation of pit, tunnels, shafts, lining of tunnels, shotcreting rock bolting drainage holes etc. It had full knowledge about site condition. A report of the quality of the work done was also called for. The Executive Engineer re-submitted the case and noted that respondent No. 4 had been working at Power House-II Complex since 1981 and executed major works of excavation of pit, tunnels, shafts, lining of tunnels, shotcreting rock bolting drainage holes etc. It had full knowledge about site condition. So far petitioner-company was concerned, it was noted that it had done only one work with the RSEB at Power House. They did guniting of down stream face of power-house building. That work was also delayed by four months. Then the matter was examined by the D C.E. (Civil). In examining the respective competence and expertise, the Deputy Chief Engineer took into consideration three factors namely (a) experience of the work in respect of the items, (b) knowledge in regard to site condition and (c) performance of work carried out with the RSEB. The Deputy Chief Engineer (Civil) was of the view that the petitioner-company depends on some other agency for excavation work and its experience in regard to excavation work was not convincing. As against this, respondent No. 4 had executed several excavation works and in critical areas involving controlled blasting. The site conditions were also better known to the respondent No. 4. In the back-ground of these notings about ability, competence and expertise of two tenderers, the matter went to the Chief Engineer. The Chief Engineer discarded the petitioner-company for the work looking to the above comments of the Executive Engineer and the D.C.E.(Civil). The Chief Engineer noted that there was some variation of rates and, therefore, attempt should be made to further narrow down dewatering, further safeguards should be taken in interest of the RSEB, in case the quantum of the work was reduced. Respondent No. 4 was directed to be called for discussion. Respondent No. 4 wrote a letter on 29-7-1987 that he was ready to reduce tender by about Rs. 1,05,000/-. This also made this contract amount at Rs. 43,71,881/-. The petitioner-company complains that this reduction of Rs. 1,05,000/- was made by respondent No. 4 collusively with respondents Nos. 1, 2 & 3 to make his offer lower than that of the petitioner-company and, therefore, the contract was given to him by unfair means. 31. 1,05,000/-. This also made this contract amount at Rs. 43,71,881/-. The petitioner-company complains that this reduction of Rs. 1,05,000/- was made by respondent No. 4 collusively with respondents Nos. 1, 2 & 3 to make his offer lower than that of the petitioner-company and, therefore, the contract was given to him by unfair means. 31. It is true that the Government or its instrumentalities or public bodies should not give a contract for a consideration which is higher unless of course there are other considerations which rendered it reasonable and in public interest to do so. The expertise, ability and competence to do job is very relevant fact to be taken into consideration It is not a case where there is no explanation as to why respondent No. 4 came to be chosen without any rhyme or reason, It is a case where competence and expertise of the respective tenderers to perform excavation work on rocks was of vital importance and had a bearing on the ability and capability to execute the work. In R.D. Shelly's case (supra), it was observed that if the Government departed from prescribed standard or norm in any particular case or cases, its action was liable to be struck down, unless it could be shown that the departure was not arbitrary but was based on some principle which was not irrational, unreasonable and discriminatory. In the instant case, departure was made because the petitioner-company lacked experience and expertise in excavation of rocks and blaster. It even did not possess any licence for explosives and it had to depend for that on other local agencies. In Sachidanand Pandey`s case also, his Lordship O. Chinnappa Reddy, J had observed that the very nature of the construction and establishment of Five Star Hotel was indicative of requirement of expertise and sound financial position. The work was connected with Power House-III under Mahi Hydel Project. If on account of lack of expertise any mistake was committed in excavation of rocks, it would have affected the energy project of the RSEB and there could be danger of tunnel being indundated by river water. Obviously, therefore, public interest was also involved in proper execution of completion of the project work as increase in the supply of electricity energy depended on the successful completion of this part of the work. The petitioner-company having failed to establish that the action of respondent Nos. Obviously, therefore, public interest was also involved in proper execution of completion of the project work as increase in the supply of electricity energy depended on the successful completion of this part of the work. The petitioner-company having failed to establish that the action of respondent Nos. 1 to 3 was unreasonable or not in public interest, the action of granting contract to respondent No. 4 cannot be invalidated or condemned. Merely because in pursuance of the order of the Chief Engineer, the respondent No. 4 could be persuaded to reduce variation in the rates and respondent No. 4 made reduction by Rs. 1,05,000/- does not lead to the conclusion that it was all collusive and consequence of favouritism or nepotism. The petitioner-company has failed to satisfy that it had expertise, ability and competence to perform excavation work of rocks. Its own documents and past experience go to show that it had expertise only in guniting, shotcreting and pressure grouting and not in excavation and blasting rocks. 32. Consequently, this writ petition fails and is hereby dismissed. Looking to the circumstances of the case, the parties shall bear their own costs of the writ petition.Petition dismissed. *******