R. C. LAHOTI ( 1 ) THIS common judgement shall govern the disposal of the two writ petitions namely CWP No. 4307/93 filed by M/s Aurochem (India) Private Limited and CWP No. 5084/93 filed by M/s Nestor Pharma (P) Limited, impleading (1) Union of India (ii) The Directorate General of Supplies and Disposals, through its Director General and (iii) M/s Parsman Pharmaceuticals Limited as the respondents. ( 2 ) THE respondents are common in the two writ petitions. Both the petitions raise common questions of law for decision in the background of identical sets of interconnected facts. The two petitions have been heard anologously. The parties too are represented by the same sets of learned counsel. ( 3 ) CWP NO. 3707/93 was filed by M/s Aurochem (India) Private Limited on 9th September, 1993. CWP NO. 5084/93 was filed by M/s Nestor Pharma (P) Limited on 4th November, 1993. The dates of filing of the two petitions have some relevancy as the narration of events would show. ( 4 ) AT the very outset it may also be mentioned that looking at the manner In which the two petitions have been argued by the learned counsel for the parties and the challenges made by either side have been sought to be answered and met with by the opposing counsels, we are not confining ourselves to the strict rules of pleading. PUblic interest also being involved we are dealing with and disposing off all the - contentions raised at the bar, though of course strictly by reference to the material brought on record. Original file of the contract bearing No. 18 (11)/93-P-II (Noting portion) was made available for our perusal by Mr. Sarin, the learned Sr. Panel Counsel for Union of India. ( 5 ) ON the chronology of the events and on the relevant and material part of the statement of facts there is no controversy. The facts in brief in so far as relevant for the purpose of dealing with the contentions raised at the bar are only being noticed hereinafter. ( 6 ) THE Government of India took up a prestigious project called Child Survival and Safemotherhood Project 1993-94. Credit was received from the International Development Association (IDA) towards the cost of project. It was financed by the World Bank. ( 6 ) THE Government of India took up a prestigious project called Child Survival and Safemotherhood Project 1993-94. Credit was received from the International Development Association (IDA) towards the cost of project. It was financed by the World Bank. The Ministry of Health and Family Welfare issued an Indent to the Directorate General of Supplies and Disposals (DGSandd) for procurement of Folic Acid and Ferrous Sulphate tablets (large and small), the large tablets containing Ferrous Sulphate with 100 mg. elemental iron and 0. 5 mg. of Floic Acid IP and the small tablets containing Ferrous Sulphate with 20 mg. . elemental Iron and 0. 1 mg. of Folic Acid. The large tablets are beneficial for the mothers during pregnancy so as to counter the deficiencies of folic acid and iron contents in the body which generally occurs during the period of pregnancy. The small tablets are beneficial for the child as they provide the essential folic acid and 1ron contents necessary for the child growth and development. ( 7 ) INVITATION for international competitive bidders was issued on 15th January, 1993 by publication in the Indian Trade Journal and two leading English newspapers as also in the United Nations Development Business. The tenders were due for opening on 7th April, 1993. The tenders were Invited for different line-items region-wise of the country. In the case at hand we are concerned with line items 5 and 6. Line item 5 was referable to Calcutta and Guwhati consignees and line item number 6 was referable to Kamal and Delhi consignees. ( 8 ) FOR line item 5, six offers were received, out of which six, two were from M/s Nestor Pharma (P) Limited and M/s Parsman Pharmaceutlcals, respectively the petitioner and the respondent No. 3 In CWP No. 5084/93. For line Item 6. four offers were received, of which two were from M/s Aurochem (Indla) Private Limited and M/s Parasman Pharmaceutlcals, respectively the petitioner and the respondent No. 3 In CWP NO. 4307/93, For the sake of brevity in this judgment we would be referring to the above said three companies by their first names viz. Nestor, Aurochem and Parsman. ( 9 ) THE bids received were evaluated and ranking statements were prepared, the relevant extracts whereof are as under: - LINE ITEM-5[for Calcutta and Guwahati consignees ). ( 10 ) ALL the bids were received in time. Nestor, Aurochem and Parsman. ( 9 ) THE bids received were evaluated and ranking statements were prepared, the relevant extracts whereof are as under: - LINE ITEM-5[for Calcutta and Guwahati consignees ). ( 10 ) ALL the bids were received in time. The time for finalising the bids was extended from time to time with the consent of the bidders, who had all agreed to extend the validity of their respective offers till 7th September, 1993. It appears that in between the World Bank was asked vide FAX dated 1oth June, 1993 to communicate their no objection to hold negotiations with all the respective bidders as it was considered that the rates received were on higher side. The World Bank vide Its FAX dated 23rd June, 1993 refused to approve the negotiations being held and instead advised the contracts being awarded to parties as per bids received and as per ranking statements. ( 11 ) IMMEDIATELY on receipt of FAX of the World Bank, a meeting of Tenders Advisory Committee (TAC) was held on 24th June, 1993 in the room of Additio Director General (G) exercising power of Director General (Sandd ). It was. however, brought to the notice of the TAC members that M/s Parsman Pharma (Haryana) had against LCB case No. 0001 for procurement of ORS furnished tampered drug licence in an attempt to secure contract. On detecting the same DG had approved banning proceedings against the firm. The matter was accordingly reported to the Registration Branch of Directorate General of Supplies arid Disposals for taking further action on 31st May. 1993. In view of this TAC recommended to Ignore offers made by Parsman. As to Line Item-5 the TAC recommended placing of order to next lower tenderer i. e. M/s Nestor aceutlcals, Faridabad at an evaluated rate of Rs. 17. 21 per thousand tabs. As to Line Item-6 also the TAC recommended placement of order to next lowest tenderer i. e. M/s Aurochem (Indla) New Delhi at an evaluated rate of Rs. 16. 92 per 1000 tabs. ( 12 ) HERE itself It would be apropriate to notice the nature of allegations against Parasman which was considered enough in the opinion of TAC to ignore its offer. We extract and reproduce from the letter dated 10th August, 1993 from the DGSandd. 16. 92 per 1000 tabs. ( 12 ) HERE itself It would be apropriate to notice the nature of allegations against Parasman which was considered enough in the opinion of TAC to ignore its offer. We extract and reproduce from the letter dated 10th August, 1993 from the DGSandd. It says: "the Director General (Supplies and Disposals) has approved the proposal to the Department of Supply for initation of banning proceedings against the following firm for the reason stated below: Name of the firm Nature of complaint/ allegation M/s Parsman Pharmaceu- The firm submitted a forged ticals (Pro: SHivalick Drug licence against World (I) Pvt. Ltd. 189 DLF Bank Directorate Bid No. W-4/ Industrial Area, Phase-1 61/d-2/s/5/h-0003/icb- Faridabad, Haryana. 0001 opened on 28. 1. 93 for procurement of 27. 50 Lakh nos. ORAL REHYDRAT- ION SALT I. P. (ORSCITRATE ). " ( 13 ) THE Secretary of the Department, the Director General of Supplies and Disposals as also the Chief Vigilance Officer were of the opinion that formal banning proceedings having been set in motion against Parasman it may not be advisable to consider its offer. The matter reached the Hon ble Minister of State, the authority competent to take the final decision. On 2 5. 8. 9 3 he recorded his opinion as under: - "the proceedings of banning of the parties as suggested by the CVO is quasi-judicial which will have to go through a number of legal requirements. At this stage if there is no decision against the party, I do not think it would be proper on our part to deprive the parties on the basis of a mere enunciation of action against it". The Hon ble Minister reiterated his view; which he had also expressed earlier on 18th August, 1993 to award the contract to the lowest bidder in accordance with the ranking statement ( 14 ) PURSUANT to the decision dated 25th August, 1993 of the Minister of State, on 27th August, 1993, the award of contract was notified to Parsman. The total quantity to be supplied was 20608 lacs tablets of a total value of Rs. 3,41,51,957. 00. On 8th September, 1993 Parasman acknowledged the receipt of award and confirmed that they would furnish performance security as per terms and conditions of the bid documents before 27th September, 1993. On 8th September, 1993 Parsman attended the office of DGSandd and executed the contracts. 3,41,51,957. 00. On 8th September, 1993 Parasman acknowledged the receipt of award and confirmed that they would furnish performance security as per terms and conditions of the bid documents before 27th September, 1993. On 8th September, 1993 Parsman attended the office of DGSandd and executed the contracts. Parsman failed to furnish the performance guarantee before 27th September, 1993. On 13th October, 1993 the bank guarantee towards performance security was deposited. The bank guarantee was dated 10th October, 1993 accompanied by a letter dated 13th October, 1993 from the bankers namely Punjab and Sind Bank, Rani Jhansi Marg, New Delhi, stating that the guarantee required confirmation of the control ling office namely Punjab and Sind Bank, Connaught Circus, New Delhi. The later that is the Controlling Officer certified its confirmation on 9th November, 1993. ( 15 ) HERE itself we may extract and reproduce the relevant parts of the bid documents and contract so as to appreciate the consequences flowing from the failure of Parsman to furnish performance security within the prescribed time: THE Goods covered under this invitation are required to be delivered at site as per Delivery Schedule indicated in the Schedule of Requirements (Sheet 11-2) of Section-11, Part II after signing of the Contract and establishment of the Letter of Credit (for Purchaser s ). No credit will be given to earlier deliveries and Bids offering delivery beyond 2 (two) months of required Delivery Schedule against each instalment (of signing the contract and establishment of the Letter of Credit where applicable) will be treated as unresponsive. Within this acceptable range, an adjustment of (2%) per month will be added to Bids offering deliveries later than the required Delivery Schedule against each instalment for evaluation.) xxxx xxxx xxxx xxxx 34. Performance Security 34. 1 Within 30 days of the receipt of notification of award from the Purchaser the successful Bidder shall furnish the Performance Security in accordance with the conditions of he Contract, in the Performance Security Form as per the format provided in the Bidding Documents. 34. 2 Failure of the successful Bidder to comply with the requirement of Clause 33 or Clause 34 shall constitute sufficient grounds for the annulment of the award and forfeiture of the Bid Security, in which event the Purchaser may make the award to the next lowest evaluated Bidder or call for new Bids. " "general CONDITIONS OF CONTRACT 7. 34. 2 Failure of the successful Bidder to comply with the requirement of Clause 33 or Clause 34 shall constitute sufficient grounds for the annulment of the award and forfeiture of the Bid Security, in which event the Purchaser may make the award to the next lowest evaluated Bidder or call for new Bids. " "general CONDITIONS OF CONTRACT 7. Performance Security 7. 1 Within 30 days after the Supplier s receipt of notification of award of the Contract the Supplier shall furnish Performance Security to the Purchaser in the amount specified in the special conditions of contract? 7. 2 The proceeds of the Performance Security shall be payable to the Purchaser as compensation for any loss resulting from the Suplier s failure to complete its obligations under the Contract. 7. 3 The Performance Security shall be denominated in the currecy of the contract or in a freely convertible currency acceptable to the Purchaser, and shall be in one of the following forms: (a) A bank guarantee or irrevocable Letter of Credit issued by a scheduled bank located in the Purchaser s country or abroad duty confirmed by an indian sched uled bank if the guarantor is a foreign bank located outside the Purchaser s country, acceptable to the Purchaser, and in the form provided in the Bidding Documents or another form acceptable to the Purchaser or (b) A Pay Order/bank Draft drawn in favour DGSandd. New Delhi. 7. 4 The performance Security will be discharged by the Purchaser and returned to the Supplier not later than 30 days following the date of completion of the Supplier s performance, obligations, including any warranty obligations under the Contract. No interest will be payable by the Purchaser on this Performance Security. xxxx xxxx xxxx xxxx 20. Delays in the Supplier s Performance The Time and the Date specfid in thecontract for the delivery of the Goods shall be deemed, to be the essence of the Contract. 20. 1 Delivery of the Goods and Performance of Services shall be made by the Supplier in accordance with the time schedule specified by the Purchaser in its Schedule of Requirements. 20. 2 An unexcused delay by the Supplier in the performance of its delivery obligations shall render the Supplier liable to any or all of the following sanctions, forfeiture of its Performance Security, imposition of liquidated damages, and/or termination of the Contract for default. 20. 2 An unexcused delay by the Supplier in the performance of its delivery obligations shall render the Supplier liable to any or all of the following sanctions, forfeiture of its Performance Security, imposition of liquidated damages, and/or termination of the Contract for default. ( 16 ) LET it also be noted here itself that though the Performance Guarantee was not filed yet Parsman had commenced making supplies. The following chart shows the position of supplies made by Parsman between the relevant dates: "supplies TO BE MADE AS PER CONTRACT. 50% by 27th November, 1993. 25% by 27th January, 1994. 25% by 27th March, 1994. . 1m1 Qty of Offered Inspected Goods Value of Tabs for despatc Goods (1000 s tin) inspection hedtins Rs. P. 41826 27. 9. 93 9. 9. 93 20. 10. 92 7,18,152. 42 32824 9. 10. 93 19. 10. 93 26,10. 93 5,63,588. 08 52160 13. 10. 93 11. 11. 93 - - - 8,95,587. 20 22253 28. 10. 93 - - - - - - 36000 1. 10. 93 - - - - - - 10. 00,204. 01 16. Exercising the power conferred by Clause 34. 2 abovequoted contract with Parsman was cancelled on 15. 11. 93 for its failure to furnish Performance Security within 30 days of the notification of award. ( 17 ) CHALLENGING the cancellation, Parsman filed a writ petition registered as CWP No. 5253/93 before Delhi High Court. The Division Bench hearing the matter directed on 23rd November, 1993 to issue the respondents therein a notice to show cause as to why rule nisi be not issued. It appears that one of the contentions raised by Parsman before the Division Bench was that in the circumstances, the contract awarded to it could not have been cancelled without affording an opportunity of hearing to it. It also appears that the Court was persuaded to agree with the contention. The Court in addition to the issuance of the show cause notice made the following directions also: "the petitioner Is directed to appear before the Secretary (in case Secretary is not available then before the Joint Secretary) Department of Supplies, Ministry of Commerce, Nirman Bhawan on 25th November, 1993 at 3 PM to show cause why the contract given to it should not be cancelled for late submission of the performance guarantee and for the delayed supplies. The decision should be taken within three days and not later than 30th November. 1993 after giving an opportunity of hearing to the petitioner. " ( 18 ) ON 25th November. 1993, the Secretary was on tour and hence the hearing was given by the Joint Secretary on the appointed date and time. The Joint Secretary who heard Parsman was of the opinion that the contract awarded to Parsman was rightly cancelled for their default and belated acceptance of the performance guarantee would give unintended benefit to the firm. However, the competent authority i. e. the Hon ble Minister of the State for Commerce, after perusing the record and having discussed with the Secretary (Supply), Director General of Supplies and Disposals, and Joint Secretary (who had given a hearing to Parsman)took a decision on 6. 1. 94 that in view of the fact that performance guarantees submitted beyond the expiry of the stipulated time have been accepted by Director General of Supplies and Disposals in several other cases, In this case also the delayed submission of the performance guarantee by fourteen days may be accepted, order cancelling the contract may be rescinded and the contract restored to Parsman. It was also decided to review the policy regarding ignoring of offers of those against whom banning proceedings were merely Initiated. ( 19 ) ON 20th January, 1994 consent of World Bank was sought to revoke the cancellation of the contract. On 6th February, 1994 the consent of World Bank was received. On 15th March, 1994 the cancellation of the contract in favour of Parsman was formally withdrawn and the delivery schedule was recycled keeping In view the delay occasioned by the intervening events and Court matters obstructing the supply. ( 20 ) ON point of clarification let it be understood that CWP No. 4307 / 93 filed by Aurochem on 9th September, 1993 was at a point of time when the award of contract had been notified to Parsman. Naturally the relief prayed for in the petition was quashing of the award of contract by the respondents 1 and 2 to Parsman. the respondent No. 3. Naturally the relief prayed for in the petition was quashing of the award of contract by the respondents 1 and 2 to Parsman. the respondent No. 3. CWP No. 5084 was filed by Nestor at a point of time when Parsman had defaulted in furnishing the performance security within the period of 30 days from the date of notification of award of contract and hence the challenge to the validity of award of contract in favour of Parsman was founded additionally on the ground of failure of Parsman to furnish performance security within the time prescribed. ( 21 ) MR. Arun Jaitley, the learned Senior Advocate appearing for the two petitioners has crystallsed his grounds of attack in three heads: (I-A) The respondents No. 1 and 2 being the state within the meaning of Article 12 of the Constitution and having themselves laid down the policy of denying contracts to such parties against whom banning proceedings were pendlng. were they justified in by-passing their own guidelines and accepting the offer of Parsman who was under shadow of banning proceedings? (I-b) Whether the Hon ble Minister was justified In deciding In favour of award of contract to Parsman in face of opinion to the contrary recorded by TAC and endorsed by the Secretary? (II) Whether the respondents 1 and 2 were justified In condoning the delay In furnishing performance security by Parsman when in view of Clause 34 of the contract, the contract In favour of Parsman was rendered liable to be - cancelled for Its default In furnishing the performance security within the prescribed time, which event had also given rise to a legitimate expectation in favour of the petitioners that they being the next below bidders would get the contract; and (III) Whether the Hon ble Minister could have taken a decision to uphold the contract in favour of Parsman when the Division Bench of Delhi High Court in CWP 5253/93 had by its order dated 23rd November, 1993 directed the matter to be heard by the Secretary/joint Secretary, Department of Supplies, Ministry of Commerce, who had formed an opinion of not rescinding the concellatlon? ( 22 ) THE respondes 1 and 2 and the respondent No. 3 have filed separate counters though the defences raised by them are on similar lines. ( 22 ) THE respondes 1 and 2 and the respondent No. 3 have filed separate counters though the defences raised by them are on similar lines. It is submitted that mere pendency of banning proceedings unless they have achieved a finality cannot legally and validly deprive a citizen of its right to trade and have dealings with the State. At the- hearing Shri R. K. Garg, the Senior Advocate, appearing for respondent No. 3 went on to the extent of submitting that the very concept of black listing or suspending dealings during the pendency of the black listing/ banning proceedings was offensive of fundamental right to freedom of trade enshrined in Article 19 (l) (g) of the Constitution. Shri M. M. Sarin the learned Standing Counsel for the Union of India has not subscribed to this contention of Shri R. K. Garg. The stand taken by Mr. Sarin is that power to black list/ban a dealer as also a power to suspending dealings do vest in the State though the present one was a case where in the peculiar facts Parsman was rightly held not deserving exclusion from dealings merely on account of pendency of ban-proceedings relatable to some other contract. All the respondents then joined in submitting that the Hon ble Minister is the competent authority to take a final decision. The Committee such as TAC and the bureaucrats such as the Secretary/joint Secretary are merely steps in the administrative hierarchy. Their opinions are advisory and though available for consideration, do not necessarily bind the competent authority. The decision taken by the competent authority is not vitiated and is not even questionable merely because of it being a decision contrary to the opinion expressed by those in the ladder below. The offendmg default in furnishing the performance security within the time prescribed related not to the pre-contract era or the contract formation stage but to the post-contract period when the rights of the parties had already stood crystalised in the contract and hence they shall have to be determined by reference to the provisions of the Indian Contract Act, that being the law applicable in accordance with the terms of the contract. The Division Bench of Delhi High Court by its order dated 23rd November. The Division Bench of Delhi High Court by its order dated 23rd November. 1993 had provided for a hearing to be given by the Secretary/joint Secretary and not for a decision to be taken by any of them. After affording the hearing the Joint Secretary had recorded his opinion which was considered by the competent authority i. e. the Hon ble Minister. The authority of the later to take the decision was not in any manner whittled down or taken away nor could it so have been "intended, by the order of the Division Bench of Delhi High Court. ( 23 ) WE shall now take up each of the contentions advanced and deal with them seriatim. (I-A)THE effect of pendency of banning proceedings on the right of Parsman to enter into contract with the State. ( 24 ) WE open the topic for discussion by noticing the contention raised by Shri R. K. Garg, Senior Advocate, on behalf of the respondent No. 3 that black listing/banning or suspension of dealing by Government with any citizen founded on a circular Issued in exercise of executive power of State is offensive of Article 19 (l) (g) of the Constitution as it does not amount to a reasonable restriction on the exercise of the fundamental right to" carry on trade or business imposed by any law within the meaning of Article 19 (6 ). It is submitted that any restriction on freedom of trade or business must satisfy these tests: it should be reasonable, in the interest of general public and imposed by any. existing law. In as much as suspension of dealing with Parsman was authorised by a mere circular issued under the executive power of the State, but had no sanction in law, the same was unconstitutional. ( 25 ) ARTICLE 19 (l) (g) and Article 19 (6) of the Constitution provide as under: " 19. Protection of certain right regarding freedom of speech, etc. (1) All citizens shall have the right - XXXX XXXX XXXX (g) to practise any profession, or to carry on any occupatlon, trade or business. "xxxx XXXX XXXX " (6) Nothing In sub-clause (g) of the said clause shall affect the operation of any existing law In so far as It Imposes, or prevent the State for making any law imposing. "xxxx XXXX XXXX " (6) Nothing In sub-clause (g) of the said clause shall affect the operation of any existing law In so far as It Imposes, or prevent the State for making any law imposing. In the Interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and. In particular, (nothing In the said sub-clause shall affect the operation of any existing law In so far as It relates to, or prevent the State from making any law relating to:- (I) the professional or technical qualifictions necessary for practising any profession or carrying on any occupation, trade or business, or. (II) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, Industry or service, whether to the exclusion, complete or partial, of citizens or otherwise)" ( 26 ) AS the question raised Is one of freedom of trade by reference to a contract entered Into between the Government and a private Individual, we have also to notice Articles 301 and 298 of the Constitution. They provide: "article 301. Freedom of trade, commerce and Inter- course:- Subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free. " 299. Power to carry on trade, etc-The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose: Provided that- (a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and (b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State legislature may make laws, be subject to legislation by Parliament)" ( 27 ) SHRI Garg placed reliance on the following passage from Mohd. Yasin vs. Town Area Committee, Jalalabad and another AIR 1952 SC 115 :- "if, therefore, the licence fee cannot be Justified on the basis of any valid law no question of its reasonableness can arise, for, an illegal impost must at all times be an unreasonable restriction and will necessarily infringe the right of the citizen to carry on his occupation, trade or business under Article 19 (1) (and) and such infringement can properly be made the subject-matter of a challenge under Article 32 of the Constitution. "and submitted that so long as blacklisting/banning/suspension of business dealings with any citizen did not have sanctity originating in any valid law, it was not necessary to enter into question of reasonableness or otherwise of the circular providing for banning/suspension of dealings with respondent No. 3 as the circular would be basically violative of Article 19 (1 j (g) of the Constitution. ( 28 ) IT is not necessary to enter into an indepth examination of the contention in as much as prima facie itself we are 0n the opinion that the contention advanced by Shri Garg is too tall a contention difficult to swallow. ( 29 ) SHRI Arun Jaitley, learned senior counsel appearing for the petitioners, has rightly pointed out that the extent or the content of the right guaranteed by Article 19 (l) (g) of the Constitution has to be examined and if that is done, it would be crystal clear that validity of provision as to black listing/banning or suspension of the proceedings is to be tested not on the touchstone of Article 19 (l) (g) of the Constitution but of Articles 14 and 16 thereof. Shri Jaitley has rightly relied on a Division Bench decision of this Court in M. K. Mathulla v. N. N. Wanchoo and another AIR 1970 Delhi 195. The Division Bench has held: "it is true that every citizen has a right to carry on his avocation, but the right to work does not mean that a person has also a right to exact work or to force himself on another for employment. This applies as much to employment under the State as to employment under a private empoyer. What then is the extent of this right? This applies as much to employment under the State as to employment under a private empoyer. What then is the extent of this right? In our view, the only right that the Constitution guarantees to a citizen under Article 19 (l) (g) is that he has a right to practise any profession or to carry on any avocation, trade or business subject to such reasonable restrictions on the exercise of that right as may be imposed by the State in the interest of the general public. This includes the right to remain open for employment or to be available to offer oneself for employment. The extent of the right lies in the right to offer oneself and the right to be considered for employment. It is open to the State to say it shall not employ dishonest men. It is also open to the State to say who and by what means the question as to whether a person is honest or dishonest should be decided, but when it makes such a provision it has to do consistently with the requirements of Article 14 of the Constitution and that necessitates thabefore a citizen is condemned and debarred from exercising that right to be considered for employment he must be heard. " "the question is not one of merely laying down qualifi cations for employment as Mr. Aggarwala tried to make out, for It is not disputed that the State can prescribe qualifications. But Just as no citizen shall on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of any employment or office under the State as laid down in Article 16 (2) of the Constitution in much the same way the right of equality of opportunity guaranteed under Article 16 (1) postulates that a citizen shall not be debarred from being considered for employment or appointment to an office under the State by an ex parte finding arrived at against him by a funtionary of the State that he has been found dishonest and as such the door of such employment or appointment shall remain shut in his face. Before the door is slammed against him he has a right to be heard. That is about the only right which the petitioner can legitimately claim and to that we see no valid defence. Before the door is slammed against him he has a right to be heard. That is about the only right which the petitioner can legitimately claim and to that we see no valid defence. " (Emphasis supplied) ( 30 ) LAW was so laid down in Erusian Equipment and. Chemicals Ltd. vs. State of West Bengal and another 1975 SCC (2) 674: " Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposl of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity applies to matters of public contracts. The State need not enter into into any contract with anyone but if it does, it must do so fairly without dicrimination and without unfair procedure. No one has any right to enter into a contractwith the Government. but everyone is entitled to equal treatment with others who offer tenders or quotations for the purchase of goods. This privilege arises because it is the Government which is trading with the public, and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. The activities of the Government have a public element and, therefore, there should be fairness and equality. " "exclusion of a member of the public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in goods by discriminating against him in favour of other people. The State can impose reasonable conditions regarding rejection and acceptance of bids or qualifications of bidders. Just as an exclusion of the lowest tender will be arbitrary, similarly exclusion of a person who offers the highest price from participting in a public auction would also have the same aspect of arbitrariness. : "black listing has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gain. : "black listing has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gain. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. Black listing tarnishes one s reputation and reputation is a part of person s character and personality. The fact that a disability is created by the order of black listing indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair paly require that the person concerned should be given an opportunity to represent his case before he is put on the black list. " (emphasis supplied) ( 31 ) IN Rai Sahib Ram Jawaya Kapur and others vs. The State of Punjab AIR 1955 SC 549 a question arose whether a publisher or a printer of goods has a fundamental right under Article 19 (l) (g) of the Constitution to have his works prescribed for classes in the school run by the Government. Their Lordships of the Supreme Court observed: "there is no fundamental right in the publishers that any of the books printed and published by them should be prescribed as text books by the school authorities or if they are once accepted as text books they cannot be stopped or discontinued in future. " ( 32 ) IT is crystal clear that though freedom of trade is guaranteed but there is no fundamental right to trade with a particular person or an authority. Black listing/banning or suspension of business dealings by Government with any particular indiviual does not offend Article 19 (l) (g) of the Constitution so long as it can withstand the test of the Articles 14 and 16 of the Constitution. Power to blacklist, ban or suspend the dealing is to be exercised fairly and reasonably and consistently with the rules of natural justice, unless excluded. When the administrative power of blacklisting/banning or suspending business dealings by Government with any individual has been exercised fairly, reasonably and consistently with the principles of natural justice where they are attracted and to the extent to which they are attracted. When the administrative power of blacklisting/banning or suspending business dealings by Government with any individual has been exercised fairly, reasonably and consistently with the principles of natural justice where they are attracted and to the extent to which they are attracted. the person black listed/banned or suspended constitutes a class by Itself and cannot complain of having been treated with hostile discrimination. ( 33 ) THE Government does have power to black list and thereby terminate business dealings with the person black listed during the operative period of blacklisting is a phenomenan well established by a catena of decisions. (See - Joseph Vilangandan V. The E. E. (P. W. D.) AIR 1978 SC 930 ; Erusian Equipment and Chemicals Ltd. Vs. State pfw. P. AIR 1978 SC 266 ; Mrs. sharda Sawantiv. State of M. P. AIR 1987 M. P. 284; Preetam Pipes Vs. TN Slum Clearance Board AIR 1986 Mad 310 : Dandapani Roula V. Statae of Orissa AIR 1986 Ori 220 ) ( 34 ) BUT Parsman was not blacklisted. Business dealing with him was sought to be suspended pending decision on black listing. ( 35 ) SHRI Arun Jaitley, the learned Senior Advocate, appearing for the petitioner has cited M/s Sukhwinder Pal Bipan Kumar and others vs. State of Punjab and others AIR 1982 SC 55 in support of the proposition that power to suspend business dealings is a necessary concomitant of the power to blacklist or ban a person or firm; such a power has to be read and implied though in the case at hand the circular issued by the Government of India expressely provides for suspension of dealings during blacklisting proceedings. In Sukhvinder Pal s case (supra) question arose in the context of suspension of licence issued under a licensing and price control order. Their Lordships of the Supreme Court held: "the power of suspension conferred by the second proviso to sub-clause (1) of Clause 11 of the Order is by way of an interim measure, pending the holding of an inquiry as to whether there is any breach which must result, in cancellation of She licence. It is true that the suspension of licence is a drastic measure, if taken without affording to the dealer a reasonable opportunity of stating his case, but it is a measure of social control in the interests of the community. It is true that the suspension of licence is a drastic measure, if taken without affording to the dealer a reasonable opportunity of stating his case, but it is a measure of social control in the interests of the community. The power of suspension is a necessary concomitant of the power to grant a privilege or a licence. By reason of Clause 3 of the Order, no dealer can engage in the business of purchase and sale of foodgrains except under and in accordarce with the terms and conditions of a licence issued by the licensing authority in that behalf. The dealers are free to carry on their trade or -business in food grains, subject to their complying with the terms and conditions of their licence and. the provisions of the Order. But, if they commit a breach, they must face the consequences that their licence may be cancelled or suspended under sub-clause (1) of Clause 11 of the Order. They must face the further consequences of suspension of their licence during the pendency or in contemplation of the proceedings for cancellation of the licence, if the breach is of such a nature that it must result in the cancellation of a licence. As already stated, the power of suspension is a necessary adjunct of the power to grant a licence " (emphasis added) ( 36 ) THOUGH the learned counsel for the respondent No. 3 Shri R. K. Garg, Senior Advocate, tried to distinguish Sukhinder Pal s case by submitting that there the power to cancel or suspend the licence was given by a control order which would be law within the meaining of Article 19 (6) of the Constitution which is not the case before us, but we are of the opinion that the law laid down by their Lordships does support the contention raised by Shri Jaitley. Power to suspend business dealings with a person or party against whom blacklisting proceedings are pending is a necessary adjunct or concomitant of the wider power. The absence of power to suspend may in appropriate cases defeat the very exercise and efficacy of power to blacklist ultimately. Power to suspend business dealings with a person or party against whom blacklisting proceedings are pending is a necessary adjunct or concomitant of the wider power. The absence of power to suspend may in appropriate cases defeat the very exercise and efficacy of power to blacklist ultimately. A vendor of liquor or medicine or even soft drinks may be found distributing spurious articles resulting in death or serious prejudice to health of several persons and by the time the activity is stopped finally it might have become already too late unless the power to suspend the activity was there. A student in an educational institution may be found committing murderous assault on the head of the Institution or fellow students and by the time a decision to rusticate or expel him from the Institution is taken, it may be too late unless power to suspend him from the Institution during the pendency of rustication or expulsion proceedings was there. Illustrations can be multiplied. However, the possibility of misuse of exercise of interim power cannot be also ruled out. The blacklisting proceedings may continue lor an unreasonable length of time or may be founded on an allegation held ultimately to be baseless or non-existent and if in the meantime the business dealings with such person were suspended, by the time he may earn exoneration, he may have sufferred colossal and irreparable loss by having been denied business dealings. Then there may be a case where decision to suspend dealilngs was taken just to exclude the person from an imminent business deal and that purpose having been achieved by passing on the deal to the next. one, the decision was dropped or reversed. Of course such an action would be liable to be struck down as vitiated by malafides. ( 37 ) BUT the possibility of misuse of a power cannot be a ground to deny the very existence of that power. To strike a balance between the two extremes, a reasonable view of the law would be that power to suspend is not to be exercised in a routine manner and necessarily. It has to be exercised only in appropriate cases of dire necessity where the facts of the case do warrant exercise of such power and where without exercise of interim power, the exercise of ultimate power would be rendered a farce. It has to be exercised only in appropriate cases of dire necessity where the facts of the case do warrant exercise of such power and where without exercise of interim power, the exercise of ultimate power would be rendered a farce. The authority must be satisfied on the material available that the proceedings must ultimately result in blacklisting/ banning and public interest demands suspension of dealings during the pendency of the proceedings. ( 38 ) THE law is well-settled that banning/black listing must be preceded by opportunity of hearing and must conform to the principles of natural justice. However, suspension of dealings during the pendency of the proceedings need not be, preceded by an opportunity of hearing for the affording of such an opportunity may yield to duplicacy of proceedings and may defeat the very purpose behind the suspension. The ends of natural justice can well be met by affording an opportunity of post decisional hearing if demanded. ( 39 ) THE question of suspension of dealings pending Investigation of cancellation proceedings came up for the consideration, of the Supreme Court in Liberty Oil Mills Vs. Union of India and Ors. 1984 SC 1271 in the context of the provisions of the Imports Control Order 1955. Clause 8 thereof provided for debarring a person from importing goods etc. if such person was guilty of any of the acts of commission or ommission enumerated in the clause. Clause 8 A empowers the authority to make an order suspending the importation of goods and clause 8 B provides for the authority making an order of abeyance, pending the completion of the proceedings initiated under Clause 8. The question arose whether the authority was bound to comply with the rules of natural justice and afford an opportunity of hearing before making an order of suspension or abeyance. Their Lordships held:- "on the Initiation of proceedings under Clause 8 by the commencement of investigation, the authority has to address itself to the question whether any action of an interim nature to prevent further harm or mischief is warranted pending investigation. " "we do not think that it is permissible to Interpret any statutory instrument so as to exclude natural justice, unless the language of the instrument leaves no option to the court. Procedural fairness embodying natural justice is to be implied whenever action is taken affecting the rights of parties. " "we do not think that it is permissible to Interpret any statutory instrument so as to exclude natural justice, unless the language of the instrument leaves no option to the court. Procedural fairness embodying natural justice is to be implied whenever action is taken affecting the rights of parties. It may be that the opportunity to be heard may not be pre-decisional where the danger to be averted or the act to be prevented is Imminent or where the action to be taken can brook no delay. " "pre decisional natural justice is not usually contemplated when the decisions taken are of ad interim nature pending investigation or enquiry. Ad interim orders may always be made ex parte and such orders may themselves provide for an opportunity to the aggrieved party to be heard at a later stage. Even if the interim orders do not make provision for such an opportunity, an aggrieved party has, nevertheless, always the right to make an appropriate representation seeking a review of the order and asking the authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at his request. " "it is not necessary to give a pre-decisional opportunity but a post decisional opportunity must be given if so requested by the person affected. " ( 40 ) OTHER principles deducible from Liberty Oil Mills case (Supra) and relevant for the case at hand may be stated. The decision as to suspension of business dealings has to be communicated though the reasons need not be communicated. The reasons of course must exist in the record. It would suffice if skeleton allegations are mentioned in the order, (para 22 ibid) Decision to suspend the proceedings must be animated by sense of urgency looked at from the point of view of public interest. The threatened public mischief must be such as to outweigh the likely injury to the party affected. (Paras 23,24 ibid) The proximate consideration of public interest sought to be fulfilled by preventing the threatened public mischief by issuing interim order may be outweighed by the consideration of larger public interest, such as where banning , the dealings is likely to result in loss of considerable foreign exchange or to shut down an industry resulting in large unemployment. (Paras 23,24 ibid) The proximate consideration of public interest sought to be fulfilled by preventing the threatened public mischief by issuing interim order may be outweighed by the consideration of larger public interest, such as where banning , the dealings is likely to result in loss of considerable foreign exchange or to shut down an industry resulting in large unemployment. The involvement of the person in illegal activity may be so remote or minimal tht the authority may feel it inexpedient to make an order of suspension. These are all matter for the consideration of the authority. (para 25 ibid) ( 41 ) WHAT is the test to be applied by the authority competent to take decision in the matter of suspension to determine whether the required urgency warranting suspension pending investigation existed or not? Their Lordships (vide para 25 ibid) suggested the following factors to be taken into consideration: (i) The nature of allegations; (ii) The extent of involvement of the person concerned; and (iii) The element of. the public interest (the last one being the most important ). ( 42 ) THEIR Lordships concluded by observing that once the decision to suspend was taken and that decision withstood the tests laid down here in above then in exercise of judicial review jurisdiction the court would not concern itself with the question of sufficiency of the material before the authority in arriving at its conclusion. Their Lordships impressed upon the authorities concerned entrusted with the authority of taking such actions which would be based on their subjective satisfaction and would operate to the prejudice of the person concerned, the necessity of the following: (I) To bestow careful attention to the allegations forming the basis of the proposed action on the probable consequences which may follow such action; (ii) To take the care of reciting in the order issued by them the satisfaction forming the basis of the action and a concise statement of the allegations forming the basis of the satisfaction. ( 43 ) SHRI Arun Jaltley, the learned counsel for the petitioner submitted that the circulars Issued by the respondents 1 and 2 themselves provide for suspension of dealing with such firms against whom administrative action of banning/blacklisting was pending and two consequences follow therefrom. ( 43 ) SHRI Arun Jaltley, the learned counsel for the petitioner submitted that the circulars Issued by the respondents 1 and 2 themselves provide for suspension of dealing with such firms against whom administrative action of banning/blacklisting was pending and two consequences follow therefrom. Firstly, the circular was framed for the conduct of their own affairs by the respondents 1 and 2 so as to avoid arbitrariness and hence they could not, so long as the circular remained in force, adopt the policy of pick and choose by awarding contracts to some and avoiding award of contract to others during the pendency of banning proceedings. The other consequence 1s that in case of there being competitive bidders, the very fact of detection of existence of pendency of banning proceedings against the lowest bidder created a legitimate expectation in favour of the next lowest bidder that contract would not be awarded to the lowest bidder but would be awarded to the next one. ( 44 ) IT cannot be disputed that a policy circular issued by Government binds it and its officials for the conduct of Governmental affairs though it might not have the force of law. See B. S. Minhas vs. Indian Statistical Institute and others AIR 1984 SC 363 -Raman Dayaram Shetty Vs. IAA, (1979) 3 SCC 489 ; and Dr. Amarjit Singh Ahluwalia Vs. State of Punjab (1975) 3 SCC 503 . ( 45 ) IN the case at hand we have to examine the exact purport and content of the policy circular. We extract and reproduce the relevant part of the circular (see Annexure H, Page 37 of C. W. P. No. 4307/93) issued by the DGSandd New Delhi: "sub Administrative action which can be initiated against firms for different lapses/misconducts-some clarifications. Ref: 1) Confidential D. O. No. CDN-2/6 (26)/1/83 dated 17. 1. 85 2) This section Confidential U. O. No. CDN-2/6 (26)/l/84 Vig. dated 28. 11. 85 During the Senior Officers Meeting held under the Chairmanship of Addl, Secy. on 21. 5. 1986 and 25. 9. 1986 the issue regarding consideration of offers received from the firms against whom banning proceedings are contemplated was discussed. The Addl. Secy. 1. 85 2) This section Confidential U. O. No. CDN-2/6 (26)/l/84 Vig. dated 28. 11. 85 During the Senior Officers Meeting held under the Chairmanship of Addl, Secy. on 21. 5. 1986 and 25. 9. 1986 the issue regarding consideration of offers received from the firms against whom banning proceedings are contemplated was discussed. The Addl. Secy. stated that once D. G. has taken a decision to initiate banning proceedings there will be sufficient material to show that the firm had indulged in some malpractice, which can be taken into account at the time of considering the offer. The existing instructions are clear that once it is possible to bring the malpractice within the ambit of "bad performance" the Purchase Officer can ignore the offer after recording the reasons for doing so. The definitin of "bad performance" includes substandard supply, delayed supply, supply through misrepresentation, any kind of fraud in obtining the contract or in the execution of the contract or in getting the payment etc. All that is required under the law is to record the reasons for ignoring the offer of a firm. "the abovesaid circular refers to the earlier circulars dated 17th January, 1985 and 28th November, 1985 in continuation of which the ahovesaid circular has been issued. During the course of hearing we asked for copies of those two circulars which were made available to us by Mr. Sarin the Standing Counsel for the UOI Relevant parts of the circular No. CDN2/6 (26)/l/83 dated 17th January, 1985 read as under: " The question whether quotation/tender received from a firm, whose name appears in the CBI report againt whom investigation are being processed, can be considered for placement of orders for the same item pending completion of CBI inquiry, has been examined in consultation with the Department of Supply. It has been clarified by the Department of Supply that, pending a final decision regarding the banning or otherwise of the firm, offers received from the firm would have to be considered at par with other suppliers in accordance with O. M. No. "13 (4)/79-V dated 19. 7. 79 circulated earlier (copy enclosed) and that only on the ground of performance the offers from such firms can be. ignored. This also applies in the case of a firm, against whom administrative action is pending. 7. 79 circulated earlier (copy enclosed) and that only on the ground of performance the offers from such firms can be. ignored. This also applies in the case of a firm, against whom administrative action is pending. In other words, offers of such firms can be Ignored on the basis of their misconduct, translated in terms of bad performance "another circular No. 13 (4)/79-V dated 19th July, 1979 made available to us by the learned Standing Counsel reads as under: " 1. A question arose whether quotation /tender received from a firm whose name appears in the list of businessmen , industrialists etc involved in brubery or ailed by the CBI from time to time, can be considered pari-passu with other quotations. 2. In this respect it may be stated that it is necessary to ban or suspend business dealiing with the firm before its quotations/tenders can be left out of consideration. An order banning or suspending business dealings with a firm can be passed only after issuing a notice to show cause to it why business dealiings with it should be banned or suspended. The notice should contain the grounds on which it is proposed to take the action. The reply of the firm has 10 be taken into account before passing an order banning or suspending the business dealing. The ground on which the business dealings can be suspended or banned and thprocedure thereof has been Indicated in the standarised code Issued by this Department. 3. However, valid and entertainable tenders from firms with whom business dealings have not been suspended or banned in accordance with the procedure laid down by the standardised. Code need not be left out of consideration. " ( 46 ) SEVERAL relevant factors available on record may now be noticed. The date appointed for opening the tender was 7th April, 1993. The tenders were submitted before that date. However time for opening the tenders was extended from time to time with the consent of the bidders. On 31 st May, 1993 ban-proceedings against Parsman were ressolved to be initiated in connection with some other contract. In those proceedings there had been no substantial progress till the date of consideration of the bids in the cases at hand. We do not know if the decision to initiate ban-proceedings was even served on Parsman. On 31 st May, 1993 ban-proceedings against Parsman were ressolved to be initiated in connection with some other contract. In those proceedings there had been no substantial progress till the date of consideration of the bids in the cases at hand. We do not know if the decision to initiate ban-proceedings was even served on Parsman. Even a show cause notice does not appear to have been issued to Parsman. There is nothing to show how the nature of allegations made in those ban- proceedings was going to suggest likely bad performance or unsuitability of Parsman in the present contract. No authority had recorded the case to be of such emergency as to call for an urgent or emergent action suspending dealings with Parsman even during the pendency of those banning proceedings. The test laid down by their Lordships in Liberty Oil Mills case (supra) or Sukhivinder Pal"s case (supra) was not satisfied. As already stated there was no decision actually taken by any of the respondents No. l and 2 Suspending business dealings with Parsman during the pendency of the banning proceedings, much less communicated, so as to entitle Parsman to a post decisional hearing. The circular dated 19. 7. 1979 referred to hereinabove itself provides for show cause notice preceding before banning or even suspension, which has certainly not been done. That being the factual position, in our opinion bids made by Parsman could not have been excluded from consideration solely on the ground of TAC having expressed an opinion for its exclusion. The opinion oftac advising exclusion of bids made by Parsman merely because of pendency of banning proceedings arising out of some other deal in the absence of any order of such suspension, was itself arbitrary and unsustainable in law. The Hon ble Minister rightly formed an opinion against exclusion of Parsman s bid. If only Parsman s bid vould have been excluded on account of mere resolution to initiate banning proceedings in connection with some other deal, such exclusion would have been liable to be struck down by court in exercise of power of judicial review. ( 47 ) IN so far as the contention of the learned counsel for the petitioners based on legitimate expectations is concerned we would be dealing with the same a little after while dealiing with topic II. ( 47 ) IN so far as the contention of the learned counsel for the petitioners based on legitimate expectations is concerned we would be dealing with the same a little after while dealiing with topic II. For the present suffice it to say that inasmuch as the bid made by Parsman could not have been excluded from consideration, there is no question of any expec- tation of the petitioners propping up. (I-B) Whether the Hon ble Minister could take a decision contrary of opinion recorded by Secretary? ( 48 ) THE D. B. of Delhi High Court by it order dated 23; 11. 1993 had directed Parasman to appear before the Secretary and in his absence before the Joint Secretary. Parasman did so. He was heard. The Joint Secretary who had heard Parasman put up his note on record which was not favourable to Parasman. The matter reached the Hon ble Minister who took a decision favourable to Parasman, setting aside the cancellation of contract and condoning the delay in furnishing the performance security. ( 49 ) MERELY because the Hon ble Minister took a decision contrary to the opinion expressed by the Jcint Secretary would his decision be vitiatead? In the officialdom and bureaucratic methodology, the note making, the file pushing and passing on the buck step by step is the ethos. In any healthy bureaucratic system there are bound to be differences of opinions. In fact inconsistency in the views expressed by different officers in the hierarchy at different stages enables thrashing out all the aspects relevant and enables the final authority arriving at a correct decision by availability for consideration of all the relevantaspects - pros and cons expressed in divergent notes. If the highest authority was to take a decision, only in accordance with the view expressed by those below then it may probably amount to delegating the discretion to and acting on the wisdom of those below. The decisional movement does involve taking left and right steps before reaching the finale. Merely because the bureaucratic opinions did not take a crow s flight but had moved zig-zag, the ultimate decision taken by the ultimate authority cannot be called vitiated, simply because it does not adopt the line chosen and set in by the one in the ladder below. Merely because the bureaucratic opinions did not take a crow s flight but had moved zig-zag, the ultimate decision taken by the ultimate authority cannot be called vitiated, simply because it does not adopt the line chosen and set in by the one in the ladder below. ( 50 ) IT is not disputed that the Hon ble Minister was the ultimate and the competent authority to take the decision. The decision taken by the Hon ble Minister is not alleged in the slightest to be vitiated by malafides. The decision by the Hon ble Minister cannot be faulted merely because it was not parallel with the line adopted in bureaucratic notes. (N) Whether Parasman failure to furnish the performance security within 30 days of the notification of the award of contract would necessarily entail cancellation of contract and if so whether the decision to rescind cancellation was vitiated?. ( 51 ) AS already noticed there was a delay of about a fortnight in furnishing the performance guarantee by Parsman. The forequoted several clauses of the bid conditions demonostrate that bid security taken (which was admittedly furnished by Parsman) was to be available for enforcement in any of the three eventualities contemplated by Clause 15. 7. Failure to furnish performance security In the prescribed time entailed two consequences: (i) gave rise to a discretionary power in the Government to forefeit the bid security under clause 15. 7 of Bid Terms; and (ii) brought into existence a sufficient ground under clause 34. 2 of Bid Terms for the annulment of the award of contract. No clause of the bid terms or contract conditions casts a mandatory obligation on the Government to annul the award of the contract for failure of the awardee of the contract to furnish performance security. It only gives rise to a rule of evidence that in the event of the award of the contract being annuled for failure to furnish the performance security, challenge cannot be laid by the awardee to the sufficiency of the ground for annulment. ( 52 ) NOT all the terms and conditions mentioned in notice inviting tenders are mandatory or essential. In M/s Poddar Steel Corporation Vs. M/s Ganesh Engineering Work and Ors. ( 52 ) NOT all the terms and conditions mentioned in notice inviting tenders are mandatory or essential. In M/s Poddar Steel Corporation Vs. M/s Ganesh Engineering Work and Ors. ( AIR 1991 SC 1579 ), their Lordships have held:-"the requirements in a tender notice can be classified into two categories - those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the conditions. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. "the tenderer had deposited earnest money by certified cheque instead of by cash/demand draft as provided in NIT. Their Lordships applied the dual test: could the authority waive literal compliance and what was in its interest, and then said:"it could not be said that the authority inviting the tenders could not waive the literal compliance of such a condition and accept the tender especially when it was in its interest not to reject the bid which was the highest. " ( 53 ) TO begin with the law is that the government like any private individual has got the right to enter or not to enter into a contract with a particular person. However, the courts have not digested the law to be left that loose when it is'a question of the government dealing with a private individual though in the field of contracts. The government is a government always and hence obliged to act as a government and not as a private trader. The government is not only bound by fair trade practices but its action and activities even in the field of contracts have to be reasonable, away from arbitrariness and not suspectible to the charge of hostile discrimination as amongst the equals. The governmental action may not be violative of article 19 (l) (g) of the constitution yet it shall have to withstand the fire-test of article 14 and 16 of the Constitution. If it has laid down and set for itself any standards governing its conduct, it shall not be. permitted to depart therefrom. The governmental action may not be violative of article 19 (l) (g) of the constitution yet it shall have to withstand the fire-test of article 14 and 16 of the Constitution. If it has laid down and set for itself any standards governing its conduct, it shall not be. permitted to depart therefrom. If it does so it would face indictment on the charge of arbitrariness and denial of equality of an opportunity to the similarly situated. ( 54 ) A distinction has to be kept in view between pre-contract and post-contract dealings. Once a contract stands entered into, the rights and liabilities of the parties thereto, even if one be the Government, stand crystalized into the contract and hence would be governed by the law of contracts generally as also the law governing that variety of contracts specially. In the field not covered by the law of contracts the test for judging the validity of the governmental action would be the same, that is the test of fairness, reasonableness and non arbitrariness in action. ( 55 ) THE contract as provided therein has to be interpreted in accordance with the law of the purchaser's country. Sections 55 and 63 of the Indian Contract Act become relevant and applicable. According to Section 63 every promisee may dispense with or may remit wholly or, in part, the performance of the promise made to him or may extend the time for such performance or may accept instead of it any satisfaction which he thinks fit. According to Section 55 when time for performance to do a certain thing is fixed by the contract, even if the time be of essence, the failure to perform does not automatically avoid the contract; it only renders the contract voidable at the instance of the promisee. If the time be not of essence, the promisee is entitled to compensation from the promisee for any loss occasioned to him by such failure. If belated performance is accepted, the contract cannot be avoided nor compensation claimed. Merely because time is limited for the performance of the contract or any part thereof, it does not necessarily become of the essence. If belated performance is accepted, the contract cannot be avoided nor compensation claimed. Merely because time is limited for the performance of the contract or any part thereof, it does not necessarily become of the essence. Time is of the essence of the contract only in the following three cases; (1) Where the parties have expressly stipulated the time for performance to be exactly complied with; (2) Where the circumstances of the contract or the nature of the subject matter indicate that the fixed date must be exactly complied with; and (3) Where time though not of essence of the contract originally, on delay being occurred, the other party has given notice of limiting the performance within a reasonable time. ( 56 ) HAVING noticed the law, while applying it to the facts of the case at hand, we would also deal with the submission made by Shil Jaitley, the learned Senior Counsel for the petitioner [hat on failure of Parsman to furnishing the performance security within the prescribed time, a legitimate expectation was created In favour of the petitioner that the award of contract to Parsman would be cancelled and the contract would then be awarded to tlie next lowest evaluated bidder i. e. the petitioner. ( 57 ) IT is true that the State being State even while dealing with the private parties in the realm of contractual rights, when it proposes to exercise its discretion in the field left open or permitted by statutory law, it has to exclude arbitrariness and be fair and reasonable in its action. (57. 1) In Food Corporation of India vs. M/s Kamdhenu Cattle Feed Industries AIR 1993sc 1601, their Lordships have held: "in contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. " (57. 2) Their Lordships also dealt with the doctrine of legitimate expectation and its operation in contractual matters. Their Lordships held" 'to satisfy this requirement of non-arbitrariness in a State action, it is. therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons-likely to be affected by the decision. Whether the expectation of the claimant is reasonable or legitimate is a question of fact in each case. Their Lordships held" 'to satisfy this requirement of non-arbitrariness in a State action, it is. therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons-likely to be affected by the decision. Whether the expectation of the claimant is reasonable or legitimate is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. " (emphasis supplied) (57. 3) It was a case of tender. Their Lordships approved of the State considering the amount in public fund and observed: "procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund". ( 58 ) THE relevant circumstances available on record and which prevailed in not cancelling the award of contract in favour of Parsman and in the Government condoning the delay of a few days in furnishing the performance security may now be noticed. The decision to cancel the contract for delay in furnishing performance security was taken on 15th November, 1993. By that time the supply position of Parsman under the contract as it stood has been stated in para 15 above. The 50% of the contract was either performed or was nearing performance on 15th November, 1993. Till that date Parsman had not committed breach of any term of the contract except that of 15 days delay in furnishing the performance security. The supply had already commenced. The goods were being delivered and accepted after inspection by Government. ( 59 ) WHAT was the purpose behind insisting on furnishing performance security by the awardee of the contract? Apparently to secure the performance of the contract specially the delivery cycle. Inspite of the delay in furnishing the performance security, the contract was being performed. The performance security was nevertheless furnished and became available for securing performance of the remaining part of the contract much before any occasion for any breach could have arisen. Apparently to secure the performance of the contract specially the delivery cycle. Inspite of the delay in furnishing the performance security, the contract was being performed. The performance security was nevertheless furnished and became available for securing performance of the remaining part of the contract much before any occasion for any breach could have arisen. Cancelling the award of the contract would have simply created complications and given rise to litigation, at the cost of, sacrificing the laudable object behind the contract financed by the World Bank - the upkeep of the health of pregnant mothers and recently bom children. ( 60 ) EVEN If the contract awarded to Parsman would have been cancelled, it would not have been necessarily awarded to the petitioner. The Government had two options. It could have awarded the contract to the next lowest evaluated bidder i. e. the petitioner or new bids could have been called for. The prices which might have been quoted by new bidders could not have been foretold. . They could have been much higher. Even if the contracts were to be awarded to the petitioners they were certainly at a higher price and that would have resulted in additional burden on the public funds. May be that the additional burden would have been required to be borne by the Government of India, if not underwritten by the World Bank. As submitted by Mr. Sarin in his written outline of submissions the rates quoted by Parasman were lower by Rs. 18. 4 lacs and Rs. 5. 7 lacs for the two line- items respectively. . ( 61 ) THERE were 533 projects financed by the World Bank wherein the terms and conditions were more or less identical, at the material time. Out of these 533 there were 41 cases in which performance guarantees were accepted after due dates condoning the delay in furnishing the performance guarantee and taking a decision not to annul the award of the contract on this ground. At the-time of hearing we were handed over by Mr. Sarin, learned counsel for the UOI a list of 30 such contracts along with the details showing the delay in furnishing performance security and still the contracts were not cancelled. CONTRACTS WHEREIN PERFORMANCE GUARANTEE BOND RECEIVED AFTER DUE DATES AND ACCEPTED BY DGS&d SL. CONTRACT DATE OF DUE DATE ACTUAL DATE PERIOD OF NO. NO. Sarin, learned counsel for the UOI a list of 30 such contracts along with the details showing the delay in furnishing performance security and still the contracts were not cancelled. CONTRACTS WHEREIN PERFORMANCE GUARANTEE BOND RECEIVED AFTER DUE DATES AND ACCEPTED BY DGS&d SL. CONTRACT DATE OF DUE DATE ACTUAL DATE PERIOD OF NO. NO. ISSUE OF OF PERF OF RECEIPT DELAY IN CONTRACT -ORMANCE DAYS. GUARANTEE 1. S1/c0130 30. 4. 93 31. 5. 93 8. 8. 93 68 2. S1/c013i 30. 4. 93 31. 5. 93 8. 8. 93 68 3. S1/c153 9. 6. 93 29. 6. 93 6. 10. 93 95 4. S1/c0135 4. 5. 93 24. 5. 93 6. 7. 93 43 5. S1/c0134 4. 5. 93 24. 5. 93 6. 7. 93 43 6. S1/c0068 10. 9. 93 30. 9. 93 13. 10. 93 12 7. S1/c0069 10. 9. 93 30. 9. 93 13. 10. 93 12 8. S4/c0010 10. 4. 92 30. 4. 92 6. 5. 92 7 9. S4/c0013 11. 6. 92 11. 7. 92 17. 7. 92 6 10. S4/c0025 3. 9. 92 30. 9. 92 23. 1. 93 115 11. S4/c0026 3. 9. 92 30. 9,92 23. 1. 93 115. 12. S4/c0027 10. 9. 92 30. 9. 92 29. 10. 92 29 13. S4/c0033 9. 11. 92 30. 11. 92 9. 12. 92. 9 14. S4/c0034 24. 11. 92 15. 12. 92 29. 1. 93 45 15. S4/c0038 24. 11. 92 15. 12. 92. 31. 1. 93 47 16. S4/c0039 30. 11. 92 21. 12. 92 21,1. 93 31 17. S4/c0044 7. 1. 93 31. 1. 93 19. 2. 93 19 18. S4/c0045 8. 1. 93 31. 1. 93 11. 2. 93 11 19. S4/c0046 8. 1. 93 31. 1. 93 11. 2. 93 11 20. S4/c0056 9. 2. 93 10. 3. 93 20. 3. 93 10 21. S4/c0061 2. 3. 93 31. 3. 93 27. 4. 93 27 22. S4/c0062 2. 3. 93 31. 3. 93 27. 4. 93 27 23. S4/c0063 2. 3. 93 31. 3. 93 27. 4. 93 27 24. S4/c0064 2. 3. 93 31. 3. 93 6. 7. 93 27 25. S4/c0066 7. 4. 93 7. 5. 93 22. 5. 93 14 26. S4/c0071 26. 5. 93 20. 6. 93 27. 9. 93 96 27. S4/c0072 26. 5. 93 20. 6. 93 27. 9. 93 96 28. S4/c0076 3. 5. 93 25. 5. 93 7. 6. 93 27 24. S4/c0064 2. 3. 93 31. 3. 93 6. 7. 93 27 25. S4/c0066 7. 4. 93 7. 5. 93 22. 5. 93 14 26. S4/c0071 26. 5. 93 20. 6. 93 27. 9. 93 96 27. S4/c0072 26. 5. 93 20. 6. 93 27. 9. 93 96 28. S4/c0076 3. 5. 93 25. 5. 93 7. 6. 93 12 29. S4/c0095 6. 8. 93 6. 9. 93 30. 9. 93 24 30. S4/c0096 6. 8. 93 6. 9. 93 30. 9. 93 24 ( 62 ) ANNULMENT of award of contract to Parasman grounded on marginal delay in furnishing performance security was sure to invite with reasonable justification charges of arbitrariness and hostile discrimination in as much as there was a good number of precedents available where the Government was condoning the delay, even to the extent of 115 days and accepting the belated furnishing of performance securities. ( 63 ) AS held in Kamdhenu Cattle Fields case (supra), the question of legitimate expection is not to be answered merely by looking at the claimant a-nd being guided by what he might have perceived and expected. The question for its answer depends on the facts of each case. Larger public interest is the paramount consideration. There is no allegation of malafides against the Hon'ble Minister or any of the authorities of the State. If the decision was taken bonafide and acting reasonably and fairly, the petitioner's perception and expectation have to give way. ( 64 ) THE decision of their Lordships of Supreme Court in State of Kerala" vs. K. G. Madhavan Pillai AZR 1993 SC 4 propounding the doctrine of legitimate expectations came up for consideration before a Division Bench of Andhra Pradesh High Court ingovernment of Andhra Pradesh and others vs. HEH the Nizam VIII of Hyderabad AIR 1993 AP76. Tracing the history of the doctrine the Division Bench observed;"the principle of legitimate expectation was confined mostly to right to a fair hearing before a decision is revoked or a promise of undertaking is withdrawn, but not the grant of a boon which had not fructified into a right by the Administrator passing an order. "the Division Bench further observed:"the ratio of Madhavan Pillai's case was that a person obtaining a right by reason of an intermediate order, may seek protection of his legitimate expectation. "the Division Bench further observed:"the ratio of Madhavan Pillai's case was that a person obtaining a right by reason of an intermediate order, may seek protection of his legitimate expectation. We are not called upon to refer to any decision which had preceded the impugned orders and which could have aroused legitimate expectation so that even in the absence of any right to insist upon grant of exemption, a person may successfully plead that the Court shall exercise its power, so as to guarantee enforcement of a legitimate expectation. " ( 65 ) WHAT is a legitimate expectation? Are the petitioners entitled to any relief based on their legitimate expections having been denied? We may refer to a very recent decision in U. O. I. Vs. Hindustan Development Corporation JT 1993 (3) SC 15. Their Lordships have held:"for legal purposes, the expection can not be the same as anticipation. It is diferent from a wish, a desire or a hope nor can it amount to a claim or demand on the ground of a right. However earnest and sincere a wish, a desire or a hope may be and however confidently one may look to them to be fulfilled, they by themselves cannot amount to an assertable expectation and a mere disappointment does not attract legal consequences. A pious hope even leading to a moral obligation can not amount to a legitimate expectation. The legitimacy of an expectation " can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectable. Every such legitimate expectation does not by itself fructify into a right and therefore it does not amount to a right in the conventional sense. ""legitimate expections gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystalised right as such is involved. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystalised right as such is involved. ""a person who bases his claim on the doctrine of legitimate expectation, in the first Instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken In public interest. If it is a question of policy, evenby way of change of old policy, the court can not interfere with a decision. ""if the court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision afecting such legitimate expectation is taken, has resulted in failure of Justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors. "a decision denying a legitimate expectation based on such grounds does not qualify for interference unless in a given case, the decision or action taken amounts to an abuse of power. ""the notion of a legitimate expectation (falling short of a legal right) is too nebulous to form a basis for invalidating the exercise of a power when its exercise otherwise accords with law. " (emphasis supplied) ( 66 ) THE petitioners before us had no Intermediate order in their favour. Their bids were not the lowest. It was their perception and wishful thinking that for a few days delay in furnishing the performance security, the Government of India must necessarily cancel the award of contracts made to Parsman and award the same to the petitioners without exercising the discretion whether to award the contract to next lowest bidders or to invite the bids afresh. That, to say the least, and as contended by the learned counsel for the respondents, was an illegitimate and certainly not a legitimate expectation of the petitioners. There was no such right created in favour of petitioners as would have entitled them to a right of hearing or obliged the Government to act consistently with rules of natural justice qua them before taking a decision to continue contract with Parasman. There was no such right created in favour of petitioners as would have entitled them to a right of hearing or obliged the Government to act consistently with rules of natural justice qua them before taking a decision to continue contract with Parasman. The decision taken by Government was-fair and reasonable. There was no procedural flaw. The World Bank too had consented to the restoration of the concluded contract in favour of Parsman. This was an additional factor pointing out to the fairness of the decision. ( 67 ) THE decision of the Hon'ble Minister taken on 6. 1. 94 after the hearing was given to Parsman pursuant to the order dated 23rd November, 1993 made by the Division Bench of this Court was a decision taken fairly and reasonably and we find no such flaw therewith as would render it vulnerable to Judicial review. (III)Whether in view of the Division Bench order dated 23rd termed as one without authority in view of the secretary/joint Sccretary having formed and e xpressed opinion to'the contractor? ( 68 ) THE Division Bench had not directed (nor could it have done so) the decision being taken by the Secretary or the Joint Secratary. The hearing was to be before the Secretary/joint. Secretary. The authority of the Hon'ble Minister to take the decision was not shaken merely or account of the order of the High Court intervening. 39. Can the decision taken by the Hon'ble Minister be questioned for his not having heard himself Parasman? Prof. H. R. Wade. in his celebrataed work on Administrative Law (5th edition 1982 at PP 489- 490) states;-"does natural Justice require that 'the one who decides must heair? In other words, may the hearing be given by one body, e. g. a-committee of the deciding authority, and the decision itself by another? Where the deciding authority is, a minister or central government department. It must be assumed that Parlia- ment intends the department to operate In its usual way, so that the minister's duties may be performed by subordinate officials. " ( 69 ) THE Joint Secretary having heard Parasman had put up a complete note on the file which was? placed before the Hon'ble Minister and the later took a decision after considering the note. The Hon'ble Minister's decision is placed just below the Joint Secretary's note. " ( 69 ) THE Joint Secretary having heard Parasman had put up a complete note on the file which was? placed before the Hon'ble Minister and the later took a decision after considering the note. The Hon'ble Minister's decision is placed just below the Joint Secretary's note. Before taking the decision he had discussion with the officials including the Joint Secretary who had heard Parasman. The process so adopted cannot be found fault with. ( 70 ) MOREOVER who is the person who could have felt aggrieved, if at all, by the process so adopted? Certainly not. the petitioners. Parasman was to be heard and not the petitioners. Decision was to be taken on cancellation of contract with Parasman. If he is not aggrieved, the petitioners cannot be heard to complain that Parasman should have been heard by Minister hlmself, All the contentions raised on behalf of the petitioners fail. The petitions are held liable to be dismissed. Both the petitions C. W. P.