A. K. Enterprise v. Ram Sakal Pasi — 1996 DIGILAW 137 (CAL)

JUDGMENT Visheshwar Nath Khare, C. J: This appeal at the instance of A.K. Enterprise and the cross objection by Ram Sakul Pasi are directed against an order and judgement of the learned Single Judge dated 22nd December 1995 dismissing the writ petition filed by Ram Sakal Pasi. 2. The Metal Scrap Trade Corporation Ltd., in short The MSTC, a public undertaking, invited tenders for sale of metal scrap lying at its business premises at Ichapore. The appellant as well as writ petitioner/respondent No.1 submitted tenders in response to the said advertisement. The tenders submitted by writ petitioner/respondent NO.1 was in the following terms : "But if you agree to my request, I must pay in full earnest and security money against 1500 m/t by draft against your pay order". 3. Along with the aforesaid offer writ petitioner/respondent No.1 also sent a cheque of Rs. 2,60,000/- towards the earnest money. The tender of the writ petitioner/respondent was for Rs. 3451/- per metric ton whereas the appellant's offer was for a sum of Rs. 2355/- per M.T. It is not disputed before us that the tender of the appellant conformed with the terms and conditions of the tender notice. On receipt of the tender of writ petitioner/ respondent No. 1 it was found that the said tender was conditional and was not accompanied with the bank draft as required by the terms of the tender notice. Consequently, The MSTC rejected the tender of the writ petitioner/ respondent No.1 in .terms of clause 8.1 (B) of the General Terms and Conditions of the Tender Notice. 4. Since The MSTC found that the tender of the appellant was in conformity with the terms and conditions of the tender notice and further it was the second highest tenderer, the tender of the appellant was accepted and was required to deposit the balance amount. The appellant complied with the terms of acceptance and it is at this stage writ petitioner/respondent No.1 filed a petition under Article 226 of the Constitution challenging the order passed by The MSTC rejecting his tender. This Court while entertaining the petition granted an ad interim order. Subsequently, an appeal was filed against the grant of interim order which was subsequently disposed of by a Bench of this Court. This Court while entertaining the petition granted an ad interim order. Subsequently, an appeal was filed against the grant of interim order which was subsequently disposed of by a Bench of this Court. When the matter came up before the learned Single Judge of this Court for final hearing it was brought to its notice that there is a vast difference between the price offered by the writ petitioner and the offer made by the second highest tenderer and as such The MSTC may be directed to reinvite the tenders for sale of metal scrap. The learned Single Judge found that the tender submitted by the writ petitioner was conditional in as much as it was not accompanied with a bank draft and. as such could not have been accepted and thus was of the opinion that tender of the petitioner/ respondent No.1 was rightly rejected by the MSTC. The learned Single Judge further found that the price offered by the second highest bidder, namely, the appellant, did not represent the real value of the goods to be sold and as such directed The MSTC to refund the balance amount deposited by the appellant and liberty was given to the MSTC to reinvite fresh tenders for sale of the said rental scrap. 5. Aggrieved, the second highest bidder has filed this appeal. Since the prayer of writ petitioner/respondent No.1 was not accepted by the Court, he has chosen to file the cross appeal which is being dealt with along with the present appeal. 6. The learned Counsel for the appellant urged that since the tender of appellant was strictly in terms of the tender notice and The MSTC having accepted the same, it was not open to the Court to set aside the said acceptance of a petition filed by an unsuccessful bidder. The learned Counsel in support of his argument relied upon the decisions of the Supreme Court as well as of this Court in the cases of Tata Cellular vs. Union of India, 1996 SC 11, Sterling Computers Ltd. vs. M & N Publication Ltd., AIR 1996 SC 51 and Union of India vs. M/s. Binani Consultants (P) Ltd. AIR 1995 Cal 234 . 7. On admitted facts, the question that arises for consideration is as to whether a public undertaking can part with the public property in favour of the second highest tenderer on a throwaway price. 7. On admitted facts, the question that arises for consideration is as to whether a public undertaking can part with the public property in favour of the second highest tenderer on a throwaway price. Time and again, Courts have emphasized that in contractual matters a public undertaking/authority enjoys certain amount of discretion, but such discretion is not in an absolute terms. Further, at times, Courts are reluctant to interfere with the contractual matters where there is violation of minor details of the discretion exercised by the public authority while awarding contract to a private person or body, but where the contract relates to the sale of public property and by the public authority and, further, the sale consideration represent less than the value of the property intended to be sold, such contract cannot be upheld on the ground that the settlement of the price of the property to be parted with is within the discretion of the public authority. in "Kasturi Lal Lakshmi Reddy vs. The State of Jammu and Kashmir, AI R 1980 SC 1992" It was held as thus; "It must follow as necessary 90rolary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State, such an action would be both ureasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sale or lease out its property for a consideration less than the highest that can be obtained for it unless, of course, there are other considerations which render it reasonable and in public interest to do so." 8. As noticed earlier, there was vast difference between the price for the metal scrap offered by the highest tenderer and the price offered by the appellant. There is nothing in the Affidavit-in-opposition filed by the respondents in the writ petition to show as to how the disputed contract for such a low price in favour of appellant was in public interest. In the absence of such averment or explanation in the affidavit the contract entered into between the appellant and the MSTC suffers from vice of arbitrariness and unjust favour shown to the appellant. 9. In the absence of such averment or explanation in the affidavit the contract entered into between the appellant and the MSTC suffers from vice of arbitrariness and unjust favour shown to the appellant. 9. Relying upon the decisions in the cases of "Tata Cellular vs. Union of Indian and the Sterling Computers Ltd. vs. M/s. M & N Publications Ltd. (supra), it was then urged by the learned Counsel for the appellant that while exercising powers under Article 226 of the Constitution, the Court cannot annul a contract entered into between a public undertaking and a private body as adequacy of price of the property intended to be sold is not within the realm of infirmity in the "decision making process of public authority. Elaborating his arguments, learned Counsel for the appellant submitted that unless there is an infirmity in the decision making process of the public authority while awarding a contract, the court should be reluctant to interfere with the contractual matter. In the case of Sterling Computers Ltd. M/s. M & N Publications Ltd. (supra) the Supreme Court while discussing the judicial review of the administrative decision referred to the case of "Chief Constable of the North Wales Police vs. Evans (1982), 3 All ER 141", where it was observed thus; "... is to ensure that the individual receives fair treatment and not to ensure that the authority, after according fair treatment reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the Court." 10. After noticing the above case, the Supreme Court, in the case "Sterling Computers Ltd. (supra)" held as thus; "By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House in the aforesaid case, Chief Constable of the North Wales Police vs. Evans (supra), the Courts can certainly examine whether 'decision making process' was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution ." 11. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House in the aforesaid case, Chief Constable of the North Wales Police vs. Evans (supra), the Courts can certainly examine whether 'decision making process' was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution ." 11. In sum and substance the Supreme Court has held that if the contract has been entered into between the public undertaking and a private person/ body after following the fundamental principles and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. In short, the legal position is that in the decision making process of awarding contract the interest of the State and Public has also to be taken into consideration. If the interest of the State and the public is not taken into consideration, while awarding contract of public property then it can ligitimately be said that there is an infirmity in the decision making process and it is open to judicial review by the Court in exercise of power under Article 226 of the Constitution. If public undertaking gifts a public property to an individual in shape of a contract, unless there is strong reasons for that, it cannot be said that such a contract is in the interest of the State and Public. In the present case, when the arguments were on, writ petitioner respondent No. 1 offered the price double the price of what he offered in his tender for purchase of iron & scrap which was not accepted by the MSTC From this, we can infer that the price of the metal scrap which were intended to be sold to the appellant by the MSTC was on a throwaway price, which, according to us, was not in the interest of the State and the public. The decisions relied upon by the learned Counsel for the appellant are of no assistance to his argument. We accordingly find no merit in the submission of the learned Counsel for the appellant. 12. The decisions relied upon by the learned Counsel for the appellant are of no assistance to his argument. We accordingly find no merit in the submission of the learned Counsel for the appellant. 12. In the Cross Appeal, it was urged on behalf of respondent No.1 that respondent No.1 being the highest tenderer, the contract ought to have been settled in his favour, ignoring the minor informities. The Courts, time and again, have reiterated that tender is an offer and it must be unconditional and must conform with the terms of the obligation. In the present case, we find that the tender of respondent No.1 was conditional, which is not disputed before us and, further, respondent No. 1 did not comply with the terms of obligation. Under such circumstances, it cannot be held that the infirmities on account of which the tender of respondent No. 1 was not accepted were minor infirmities. We are, therefore, of the view that the tender of the respondent was rightly rejected by the MSTC. No other points were pressed. We do not find any merit in the appeal or in the Cross Appeal. We accordingly dismiss the appeal and cross Appeal. There shall be no order as to costs. 13. After the judgment is dictated, the learned Counsel for the appellant prays for stay of the operation of the order dictated by us. We do not find any reason to stay the operation of our dictated Judgment. We, accordingly, refuse the prayer for stay. 14. All parties concerned to act on a signed copy of the operative portion of this judgment on the usual undertaking. Altamas Kablr, J.: I agree. Appeal and cross appeal dismissed.