SHIVASHANKAR BHAT, J. ( 1 ) SINCE the arguments addressed by the learned Counsel regarding interim relief had to cover the main case itself, with the consent of the learned Counsel on both sides, Writ Petition itself was heard for final disposal. In essence, petitioner questions the validity of the action of the first respondent-Bangalore Water Supply and Sewerage Board (hereinafter referred to as 'the Board') entrusting the contract of supply of 600 mm. dia. pre-stressed concrete pipes to the 2nd respondent, and further seeks a direction to entrust the manufacture and supply of the said materials to the petitioner. ( 2 ) THE first respondent issued a tender Notification dated 4-3-1989 for manufacture and supply of pre-stressed pipes, indicating the approximate value of the supply as Rs. 20,11,350/ -. The petitioner, an experienced manufacturer submitted its tender in terms of the aforesaid notification. Tenders were opened on 28-3-1989. There were only three tenderers. The rate per metre, quoted by the petitioner was the lowest, being Rs. 690/- as against the rates quoted by the second respondent (Rs. 756/-) and the third party (Rs. 777/- ). ( 3 ) ACCORDING to the petitioner, it came to know of a move to award the tender to the 2nd respondent and hence met the Chairman of the first respondent on 14-6-1989. ( 4 ) SOME correspondence between the petitioner and the first respondent ensued. In the meanwhile, there was some negotiation between the second respondent and the first respondent; the 2nd respondent reduced its rate to Rs. 685/-; the agreement between respondents 1 and 2 thereafter resulted in the placement of an order by the first respondent with the 2nd respondent; hence the present Writ Petition. ( 5 ) RULE was issued on 8-9-1989 by this Court with an interim order directing the first respondent not to enter into any contract with the 2nd respondent regarding the material in question, subject to the condition that in case second respondent had already commenced supply, the said interim order shall not affect the supply commenced already. ( 6 ) THE learned Counsel raised the following contentions in support of the Writ Petition. (1) The tender of the petitioner being the lowest, and there is absolutely nothing against the petitioner, said tender should have been accepted. ( 6 ) THE learned Counsel raised the following contentions in support of the Writ Petition. (1) The tender of the petitioner being the lowest, and there is absolutely nothing against the petitioner, said tender should have been accepted. (2) If the tenders were to be ignored and the work was to be entrusted on the basis of negotiation between the first respondent and others, petitioner also shouid have been invited to participate in the negotiation. The entrustment of the work to the 2nd respondent, ignoring the well-established norms while entering into such contracts, was arbitrary and unreasonable. (3) While the 1st respondent gave the reason for entrusting the work to the 2nd respondent was that, the 2nd respondent is a registered Small Scale Industrial Unit and was eligible for price preference upto 15%, records now disclose that, in fact, the said policy was not applied. The contract was entrusted on the basis of the private negotiations between the first respondent and the 2nd respondent and not because, the 2nd respondent was a Small Scale Industrial Unit (for short this phrase is referred hereinafter as 'ssi' ). (4) The 2nd respondent was not, in fact, registered as SSI and hence, was not eligible to any such benefit. (5) The material in question, viz. , pre-stressed concrete pipes, does not fall within the scope of the policy - Government Order - (Annexure-H) and hence reliance thereon was bad. ( 7 ) BROADLY the respective contentions were:sri t. R. Andyarjuna, the learned Counsel for the petitioner, relied on a few decisions of the supreme Court, in support of his contention, that, the first respondent having set a standard for entrustrnent of the work, as per its Tender - Notification, could not have ignored the same and in the absence of any ineligibility of the petitioner, the petitioner's tender should have been accepted; the learned Counsel further, urged that, if contract was to result out of negotiations, petitioner should have been given an opportunity to participate in the negotiation and that the petitioner was willing to reduce the rate and agreeable to supply the material in question at the same rate, at which, the 2nd respondent has now agreed to supply, under the impugned agreement. The entire negotiation between the first respondent and the second respondent was under a veil of secrecy and this is highlighted by the difference in the reasons given by the first respondent to the petitioner, and the reason now disclosed in the Court. Sri R. N. Narasimhamurthy, on the other hand, contended that, acceptance of the lowest tender is not an absolute Rule, and when a public authority enters into a contract, entire transaction and the circumstances should be examined, as to find out the reasonableness of the transaction. The learned Counsel submitted that, in the absence of any allegations of personal favouritism, bias, or mala fides, the approach of the Court is to examine the reasonableness of the ultimate transaction and as to how far public interest is affected thereby. ( 8 ) SINCE the act impugned is of the instrumentality of the State, same is liable to be tested by the touchstone of reasonableness and unarbitrariness. This test is applied, not to enforce the right of anyone of the parties who submitted the tender. The object of the judicial examination is to see whether the public interest would suffer, by the transaction in question, and the State has failed to play fairly while entering into the transaction. Court's jurisdiction is invoked usually, by one of the parties, who made the tender offering to purchase the public property or articles put up for sale at a price which he asserts as the highest, or, offering to supply goods or works to the government of a State instrumentality, at a rate which he asserts as the lowest. In such a situation, Court is not concerned as to how far, the party's interest suffered, by non-acceptance of his tender. The judicial review is permitted, in order to safeguard the public interest. ( 9 ) PUBLIC interest could be advanced or safeguarded only when the State acts reasonably and rationally. ( 10 ) WHEN a standard or norm of eligibility is laid down for the person to make his tender, the same should be insisted upon and any deviation from such a standard or norm would be nullified, as observed in RAMANA DAYARAM SHETTY v. THE INTERNATIONAL AIRPORT authority OF INDIA AND ORS. ( 10 ) WHEN a standard or norm of eligibility is laid down for the person to make his tender, the same should be insisted upon and any deviation from such a standard or norm would be nullified, as observed in RAMANA DAYARAM SHETTY v. THE INTERNATIONAL AIRPORT authority OF INDIA AND ORS. , AIR1979 SC 1628 , (1979 )II llj217 SC , (1979 )3 SCC489 , [1979 ]3 SCR1014 , it was observed: "it is a well settled Rule of administrative law that an Executive Authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. " Thereafter, while deducing the same principle from Article 14 of the Constitution, it was observed at referring to Article 14: "it requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore act arbitarily in entering into relationship, contractual or otherwise with a third party but its action must conform to some standard or norm which is rational and non-discriminatory. " ( 11 ) THE object behind the judicial review, in such cases, is succintly stated in KASTURI LAL lakshmi REDDY, etc. v. THE STATE OF JAMMU and KASHMIR AND ANR. , AIR1980 SC 1992 , (1980 )4 SCC1 , [1980 ]3 SCR1338 : "every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, 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. "At the same time, the approach of the Court was not to strike at the action of the "state by applying any straight jacket formula, as is clear from the words at page 2001: "but one basic principle which must guide the Court in arriving at its determination on this question is that there is always a resumption 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. The Court cannot lightly assume that the action taken by the Government is unreasonable or without public interest because, as we said above, there are a large number of policy considerations which must necessarily weigh with the Government in taking action and therefore the Court would not strike down governmental action as invalid on this ground, 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. This is one of the most important functions of the Court and also one of the most essential for preservation of the Rule of law. " Allotments of blazer for extraction of resin from forests in Jammu and Kashmir were challenged before the Supreme Court in Kasturi Lal's case. The main challenge was based on the ground that the contract was awarded to 2nd respondent without affording any opportunity to others to compete for obtaining such contract. " Allotments of blazer for extraction of resin from forests in Jammu and Kashmir were challenged before the Supreme Court in Kasturi Lal's case. The main challenge was based on the ground that the contract was awarded to 2nd respondent without affording any opportunity to others to compete for obtaining such contract. On an examination of the entire transaction, the Supreme court held, that, though specific advertisements inviting offers were not issued, and no set standards or norms prescribed, the impugned transaction was in public interest, having regard to the circumstsnces of the said case. ( 12 ) THE principle was again reiterated in SHRI SACHIDANAND PANDEY AND ANR. v. THE state OF WEST BENGAL AND ORS. , AIR 1987 SC 1109 wherein public property was leased to up a private hotel, without inviting tenders; this was challenged. On a consideration of the entire background and the negotiations that preceded the lease of land, Supreme Court found it to be in the public interest and hence rejected the challenge made against the lease. At page 1133 (para -39) Chinnappa Reddy, J. , observed: "on a 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 as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism. 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 as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism. " (Underlining is mine) ( 13 ) SAME theme continued in HAJI T. M. HASSAN RAWTHER v. KERALA FINANCIAL corporation, AIR1988 SC 157 , JT1987 (4 )SC 368 , 1987 (2 )SCALE1067 , (1988 )1 SCC166 , [1988 ]1 SCR1079 wherein, Jagannatha Shetty, J. , spoke for the Court in the following words: "the public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest price for the property but also to ensure fairness in the activities of the State and Public Authorities. They should undoubtedly act fairly. Their actions should be legitimate. Their dealings should be above board. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favouritism or nepotism. Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly. But that is not the only Rule. " Again, the exceptions was pointed out as, "there may be situations necessitating departure from the Rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience. " ( 14 ) THOUGH these decisions arose out of facts wherein Government property was to be leased or sold, the principle applicable therein would equally apply to the cases of supply of services or materials to the Government. Test of reasonableness and unarbitrariness cannot be applied in vacuum. Entire facts and circumstances, including the purpose of a sale or purchase by the government, are to be examined. If a particular contract awarded, would in no way harm the public interest, Court need not exercise its power to invalidate the contract. Test of reasonableness and unarbitrariness cannot be applied in vacuum. Entire facts and circumstances, including the purpose of a sale or purchase by the government, are to be examined. If a particular contract awarded, would in no way harm the public interest, Court need not exercise its power to invalidate the contract. ( 15 ) THE starting point of enquiry will, usually be, the consideration (such as sale price, or rate for works etc.) for the sale of property or supply of goods or services. In a few cases, the enquiry by the Court will be necessitated by the alleged ineligibillty or disqualification of the person to whom the contract is awarded. But the scope of enquiry cannot be confined to these aspects only. In the course of the enquiry, Court will have to examine the entire transaction for which purpose, the explanation offered by the respondents, the ultimate benefit or any adverse effect on the public interest, etc. , will have to be considered. Underselling, in the case of a sale by government, or accepting a higher rate for the supply of goods or services, at the outset would indicate, that, public interest is likely to be adversely affected by the contract in question. ( 16 ) IN HARINDER SINGH v. UNION OF INDIA, AIR1986 SC 1527 , (1986 )88 BOMLR395 , 1986 (1 )SCALE1242 , (1986 )3 SCC247 , [1986 ]3 SCR63 , 1986 (2 )UJ159 (SC ) the tender Notification was for the supply of fresh buffalo or cow milk. Appellant submitted his tender. But the authorities accepted the tender of a Governmental agency, for pasteurized milk. If tender Notification had been for pasteurized milk, appellant also would have submitted his tender for the said milk. Without any change in the policy, the tender of the governmental agency was accepted, which, in fact, quoted a higher rate. In the circumstances, the Supreme Court quashed the contract awarded to the Governmental agency and directed the acceptance of the appellant's tender. The decision, again, is based on the peculiar facts of the case, read with the principle stated at para 27 of the decision, it does not lay down an absolute proposition, that, in the case of supply of goods, the lowest tender should always be accepted. ( 17 ) RAM AND SHYAM COMPANY v. STATE OF HARYANA AND ORS. The decision, again, is based on the peculiar facts of the case, read with the principle stated at para 27 of the decision, it does not lay down an absolute proposition, that, in the case of supply of goods, the lowest tender should always be accepted. ( 17 ) RAM AND SHYAM COMPANY v. STATE OF HARYANA AND ORS. , AIR1985 SC 1147 , 1985 (1 )SCALE1237 , (1985 )3 SCC267 , [1985 ]supp1 SCR541 , 1986 (1 )UJ539 (SC ) was relied in support of the contention, that, after the receipt of tenders, the Government cannot negotiate with one of the parties and accept his new offer, without similar opportunity being given to the petitioner. The principle relied upon is found at page 1153: "a unilateral offer, secretly made, not correlated to any reserved price made by the fourth respondent after making false statement in the letter was accepted without giving any opportunity to the appellant either to raise the bid or to point out the falsity of the allegations made by the fourth respondent in the letter as also the inadequacy of his bid. The Appellant suffered an unfair treatment by the State in discharging its administrative functions thereby violating the fundamental principle of fairplay in action. When he gave the highest bid, he could not have been expected to raise his own bid in the absence of a competitor. Any expectation to the contrary betrays a woeful lack of knowledge of auction process. And - then some one surreptitiously by a secret offer scored a march over him. No opportunity was given to him either to raise the bid or to controvert and correct the erroneous statement. " The peculiar facts of the said case is found in para 15 the Supreme Court found: "facts of no two cases are alike, but if one attempts to compare the situation, the conclusion is inescapable. Appellant's bid was the highest bid. It was in the amount of Rs. 3,87,000/- p. a. Respondent No. 4 approached the Chief Minister with a slightly higher bid of Rs. 4,50,ooo/per year. This was granted without any reference to the appellant to raise his bid. Such a thing, if allowed to pass once is bound to be repeated because this method is open to the abuse of favouritism and nepotism and the loss of revenue in this case to the State is enormous. 4,50,ooo/per year. This was granted without any reference to the appellant to raise his bid. Such a thing, if allowed to pass once is bound to be repeated because this method is open to the abuse of favouritism and nepotism and the loss of revenue in this case to the State is enormous. What happened in the Court staggered everyone. Learned Attorney General Shri L. N. Sinha, who questioned the competence of the Court to deal with the matter when he witnessed the rising crescendo of the auction in the Court and the bid reached Rs. 12 lacs per year, he quietly left the court frankly stating that he does not wish any contention to be raised on behalf of the State of haryana. " However, the Supreme Court also pointed out that a highest bid may be rejected on relevant and valid considerations, one such being that concession is to be given to a weaker section of the society who could not outbid the highest bidder. Similarly, favour shown to a Co-operative society of workmen, could be upheld. The clandestine manner in which the contract was awarded resulted in its invalidation, as, it was an obvious case of favouritism shown by the government in awarding the contract. In addition, the petitioner's highest bid was rejected on the basis of allegations against the said bid without any opportunity being given to the petitioner to explain away the allegations. ( 18 ) BEARING the aforesaid principles, I proceed to consider the contentions raised before me, on facts of the case: the Tender Notification invited quotations for the supply of pre-stressed concrete pipes. The approximate value was also stated in the tender Notification. There is no dispute that the rate offered by the petitioner was the lowest being Rs. 690/- per metre, while the rate offered by the second respondent was Rs. 756. 80 per metre. According to the petitioner the tenders were opened on 28th March 1989, but no decision was taken immediately and in the month of June 1989 it became aware of a move by the first respondent to award the tender to the second respondent resulting in certain correspondence between the petitioner and the first respondent. 756. 80 per metre. According to the petitioner the tenders were opened on 28th March 1989, but no decision was taken immediately and in the month of June 1989 it became aware of a move by the first respondent to award the tender to the second respondent resulting in certain correspondence between the petitioner and the first respondent. The petitioner was told by the first respondent that the second respondent was entitled to a preferential treatment, it being a Small Scale Industrial Unit and there Is a Government Order to give such preference upto 15% of the price quoted by the lowest tenderer. Though the rate offered by the second respondent was within the range, the ultimate rate under which the contract was entrusted to the second respondent was for still lower rate. Therefore, obviously the first respondent did not rely upon the Governmental Order to give preference upto 15 per cent of the price to a SSI Unit. The petitioner also challenges the status given to the second respondent as a SSI Unit. ( 19 ) THE second respondent has filed its statement of objections. It has asserted that it is a SSI unit and that it commenced its production on 15th February 1989, though it was registered as a ssi Unit only on 8th May 1989. The second respondent also pointed out that it reduced its rate to rs. 685/- and the contract was awarded to it on the said basis. ( 20 ) THE learned Counsel for the petitioner contended that on the date when the tenders were opened the second respondent was not registered as a SSI Unit and the registration of the second respondent was subsequent as is clear from the papers produced before the Court by the second respondent. It was also contended that pre-stressed concrete pipes are not covered by the government Notification which directed preferential treatment to SSI Units. The learned counsel further stated that the petitioner was also willing to supply the material at the same rate at which the second respondent has now agreed to supply. It was emphasised by the learned counsel for the petitioner that opportunity should have been given to the petitioner to participate in the negotiation, in case the first respondent had decided to ignore the tenders already submitted. ( 21 ) THERE is no dispute that no decision was taken after the tenders were opened. It was emphasised by the learned counsel for the petitioner that opportunity should have been given to the petitioner to participate in the negotiation, in case the first respondent had decided to ignore the tenders already submitted. ( 21 ) THERE is no dispute that no decision was taken after the tenders were opened. It is also clear from the papers filed in support of the respective pleadings that the second respondent claimed to be a SSI Unit had not registered with the concerned Department on the date when it submitted its tender; but before finalisation of the contract, the second respondent had obtained the requisite registration. It is also the assertion of the second respondent that it did commence production on 15th February 1989 and according to the learned Counsel for the second respondent the status of the second respondent as an SSI Unit for all practical purposes would relate back to the said date. ( 22 ) THE certificate of registration of the second respondent as SSI Unit is found as Annexure-C filed along with the statement of objection of the second respondent. The said certificate itself states that the second respondent commenced production on 15th February 1989. Even though the learned Counsel for the petitioner contended that there ought to have been a registration by the time the second respondent submitted its tender and without such registration the second respondent cannot be granted the benefit of the Governmental Order directing preferential treatment to a SSI Unit, the fact remains that the contract was awarded only after such a registration took place. The object of the Governmental Order (filed as Annexure-H) is to grant certain concession to SSI Units of the State and such a beneficial scheme found in the governmental Order should be liberally construed. ( 23 ) ACCORDING to the learned Counsel for the petitioner, this Government Order was not applied to the facts of the case because under the said Government Order only 15% price preference has to be given in respect of the case enumerated in the said order. The pre-stressed concrete pipe is not one of the goods enumerated thereunder. ( 23 ) ACCORDING to the learned Counsel for the petitioner, this Government Order was not applied to the facts of the case because under the said Government Order only 15% price preference has to be given in respect of the case enumerated in the said order. The pre-stressed concrete pipe is not one of the goods enumerated thereunder. ( 24 ) SRI R. N. Narasimhamurthy, learned Senior Counsel, appearing for the second respondent, however, pointed out that the Government Order Annexure-H has two aspects - (i) one is to give price preference of 15 per cent in respect of enumerated goods when SSI Units come forward to supply the same and (ii) the other is to give preference to the SSI Unit as such in respect of unenumerated goods. In other words, if the subject matter of the tender is in one of the enumerated goods, even if the price quoted by the SSI Unit exceeds by 15 per cent over and above the lowest tender, the contract has to be awarded to the SSI Unit: but in other cases the ssi Unit has to he preferred, which means, if other things are equal, SSI Units would get the contract. Preferring a person depends upon, the said person being equal in other respects; the rate offered by the SSI Unit, if is equal to or lower than others in respect of unenumerated goods, the ssi Unit has to be preferred in awarding the contract. A reading of Annexure-H clearly shows that it has two aspects. After stating that in spite of many incentives and concessions ,to the tiny and small scale industrial sectors the State and its instrumentalities are not encouraging the SSI units, the Government Order proceeds to direct the preference to be given to SSI Units. Clause (4) of the Preamble directs strict implementation of giving price preference for which purpose items are reserved (items that are enumerated ). Clause (4) of the Preamble directs strict implementation of giving price preference for which purpose items are reserved (items that are enumerated ). Thereafter the Government Order proceeds to state that the articles contained in the Annexure to the said order are reserved for exclusive purchase from the tiny/ssi Units and the Government directed, " (i) Preference shall be given to the products of tiny and small scale industries of the State in all purchases; (ii) The Stores Purchase Department, various other Departmental Purchase Committees, government owned controlled Companies, Corporation, Undertakings and Autonomous Bodies like Universities and local bodies should fix up Rate Contracts with or purchase from tiny and ssi Units if the price quoted by SSI and tiny units is within the 15% of the lowest rates quoted by any non-SSI Units of the State or any SSI or non-SSI Units outside the State. " thus, it is clear from the above that in respect of the enumerated goods preference is to be given and in other cases preference shall be given to the products of tiny and SSI Units. When a governmental Policy binding on the State and its instrumentalities requires preference to be given to SSI Units, awarding of a contract for the supply of materials to a SSI Unit when the said ssi Unit reduces its rate further, cannot be held as unreasonable or arbitrary. Having regard to the aforesaid Governmental Policy, awarding of such contract would be in the interest of public, rather than being contrary to the public interest. ( 25 ) NO personal favouritism or mala fides are alleged against any one involved in the transaction. No purpose would have been served by inviting the petitioner for discussion and negotiation because it is not a SSI Unit. As happened in the case before the Supreme Court in purxotoma RAMANATA QUENIM v. MATTAN KALYAN TANDEL, AIR1974 SC 651 , (1974 )2 SCC169 , [1974 ]3 SCR64 where ultimately the price was modified to the advantage of the State, in the instant case the modified rate offered by the second respondent is the basis for awarding the contract, read with fact that it is a SSI unit, therefore the award of the contract cannot be termed as arbitrary. In my opinion no public interest would suffer by the preference given to the 2nd respondent. In my opinion no public interest would suffer by the preference given to the 2nd respondent. ( 26 ) CONSEQUENTLY this petition fails and is dismissed, but without any order as to costs. Rule is discharged.