Judgement Heard Mr. A. K. Bhowmik, learned Sr. counsel assisted by Mr. S. Ghosh, learned counsel for the petitioner as well as Mr. D. K. Biswas, learned counsel for the respondents. 2. The petitioner in response to the advertisement issued by the respondents submitted tender for transportation of foodgrains/sugar/allied materials from Railway head, Kumarghat to the godown of Agartala, the last date fixed for receipt of the tender was 13-9-1996. The petitioner along with the tender deposited earnest money of Rs. 1,60,000/-, on opening of the tenders, the tender of the petitioner was found fourth lowest. Earlier, the respondents on most occasions used to appoint more than one contractors for one transportation work against the single tender considering the volume of work and usually call all the valid tenderers to come for negotiations and reduce rates to that of the lowest tenderer or such other rates as may be reasonable and after negotiation, used to engage more than one contractors at negotiated rates after dividing the work between the contractors. In view of the usual practice of the respondents, the petitioner by letter dated 16-10-1996 intimated her willingness to the respondents to reduce her rates to a considerable extent on negotiations in case, the respondents proceeded with such negotiations. The respondents did not go for any negotiations and awarded the contract to the last tenderer, as such, thereafter the petitioner requested the respondent No. 3 to refund the earnest money of the petitioner. The respondent has refused to refund the earnest money of the petitioner in view of Cl. IV of the tender agreement. The refusal of the respondent to refund the money to the petitioner, as alleged, to be arbitrary, illegal and violative of Art. 14 of the Constitution. The petitioner by way of this writ petition has prayed for a writ of mandamus directing the respondents to refund the aforesaid earnest money. 3. The respondents have resisted the petition, contending that the respondent-Corporation has the authority to appoint more than one contractor for one transportation work. In Cl. 4 of the tender agreement, any modification or deviation of the offer subsequent to the dropping of tender, a tender is not permissible, entails the liability of the forfeiture of the earnest money as the petitioner offered to modify her earlier offer subsequent to the expiry of tender date. In Cl. 4 of the tender agreement, any modification or deviation of the offer subsequent to the dropping of tender, a tender is not permissible, entails the liability of the forfeiture of the earnest money as the petitioner offered to modify her earlier offer subsequent to the expiry of tender date. Further, the contract in question being non-statutory contract and of private nature cannot be enforced against the respondents under the extraordinary constitutional jurisdiction of the High Court under Art. 226 of the Constitution of India. 4. The learned counsel for the respondents vehemently argued that the present writ petition has arisen out of a private contract, the petitioner has no right to enforce the contract, the contract being non-statutory contract of the private nature. The learned counsel in support of his contention relied upon the decisions of the Supreme Court in Radhakrishan Agarwal v. State of Bihar (1977) 3 SCC 457 (para 10); in Divisional Forest Officer v. Biswanath Tea Company Ltd. (1981) 3 SCC 238 (paras 2, 3, 4, 5 and 6); in Mahabir Auto Stores v. Indian Oil Corporation (1990) 3 SCC 752 (para 20). 5. In Radhakrishna Agarwal v. State of Bihar (supra), the Supreme Court observed that after the State or its agent have entered into the field of ordinary contract, the relations are no more governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Art. 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. 6. In Divisional Forest Officer v. Biswanath Tea Co. Ltd. (supra), the Supreme Court held that a party cannot claim under Art. 226 an enforcement of contractual obligations and recover damages. Proper relief for the party would be to seek specific performance in a Civil Court. 7. In Mahabir Auto Stores v. Indian Oil Corporation (supra), the Supreme Court has observed that in cases where the instrumentality of the State enters the contractual field, it should be governed by the incidence of the contract. 8. Undisputedly, the respondent-Food Corporation of India is an instrumentality of the State within the meaning of Art. 12 of the Constitution of India. 8. Undisputedly, the respondent-Food Corporation of India is an instrumentality of the State within the meaning of Art. 12 of the Constitution of India. In Ramana v. I.A. Authority of India, AIR 1979 SC 1628 at page 1642 (paras 20 and 21), the Supreme Court has held as under :- "20. Now, obviously where a Corporation is an instrumentality or agency of Government, it would, in the exercise of its power of discretion, be subject to the same constitutional or public law limitations as Government. The rule inhabiting arbitrary action by Government, which we have discussed above must apply equally where such Corporation is dealing with the public, whether by way of giving jobs or entering into contracts or otherwise, and it cannot act arbitrarily and enter into relationship with any person it likes at its sweet will, but its action must be in conformity and relevance. 21. This rule also flows directly from the doctrine of equality embodied in Art. 14. It is now well settled as a result of the decisions of this Court in E. P. Royappa v. State of Tamil Nadu (1974) 2 SCR 348 : ( AIR 1974 SC 555 ) and Maneka Gandhi v. Union of India (1978) 1 SCC 248 : ( AIR 1978 SC 597 ) that Art. 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory : It must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Art. 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C.J., in Erusian Equipment and Chemicals Ltd. v. State of West Bengal ( AIR 1975 SC 266 ) (supra) where the learned Chief Justice pointed out that 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 should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. . . . . . . . . ." 9. In Mahabir Auto Stores v. Indian Oil Corporation, AIR 1990 SC 1031 at pages 1036, 1037 (paras 12 and 13), the Supreme Court held thus- "12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Art. 226 or Art.32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in M/s. Radha Krishan Agarwal v. State of Bihar (1977) 3 SCC 457 : ( AIR 1977 SC 1496 ). It appears to us, at the outset, that in the facts and circumstances of the case, the respondent-Company IOC is an organ of the State or an instrumentality of the State as contemplated under Art. 12 of the Constitution. The State acts in its executive power under Art. 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Art. 14 can be checked. The State acts in its executive power under Art. 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Art. 14 can be checked. See M/s. Radha Krishan Agarwal v. State of Bihar at p. 462 (at SCC) : (at p. 1499-1500 of AIR) (supra), but Art. 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent-Company which constituted State under Art. 12 of the Constitution may be in certain circumstances subject to Art. 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Art. 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Art. 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Art. 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Art. 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E. P. Royappa v. State of Tamil Nadu (1974) 4 SCC 3 : ( AIR 1974 SC 555 ), Maneka Gandhi v. Union of India (1978) 1 SCC 248 : ( AIR 1978 SC 597 ); Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722 : ( AIR 1981 SC 487 ); R. D. Shetty v. International Airport Authority of India (1979) 3 SCC 489 : (AIR 1979 SC 162) and also Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC 293 : ( AIR 1989 SC 1642 ). It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case. 13. The existence of the power of judicial review however depends upon the nature (of) and the right involved in the facts and circumstances of the particular case. It is well settled that there can be "malice in law." Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law. Indeed "malice in law" is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action." 10. Again in Shrilekha Vidyarthi v. State of U.P., AIR 1991 SC 537 at pages 549, 550 (paras 22 and 23), the Supreme Court held thus- "22. Indeed "malice in law" is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action." 10. Again in Shrilekha Vidyarthi v. State of U.P., AIR 1991 SC 537 at pages 549, 550 (paras 22 and 23), the Supreme Court held thus- "22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Art. 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Art.14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Art. 14 of non-arbitrariness at the hands of the State in any of its actions. 23. Thus, in a case like the present, if it is shown that the impugned State action is arbitrary and, therefore, violative of Art.14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved persons." 11. 23. Thus, in a case like the present, if it is shown that the impugned State action is arbitrary and, therefore, violative of Art.14 of the Constitution, there can be no impediment in striking down the impugned act irrespective of the question whether an additional right, contractual or statutory, if any, is also available to the aggrieved persons." 11. In view of the decisions of the Supreme Court, it is clear that even in respect of State actions in contract matters and if the contract in question is a non-statutory contract of private nature if the State actions suffer from arbitrariness, if the action of the Government in matters relating to contract fails to satisfy the test of reasonableness, the same is subject to be reviewed under Art. 226 of the Constitution of India. The State acts as an executive power under Art. 226 of the Constitution of India in entering or not entering in contracts within the parties, Art. 14 of the Constitution of India is fully attracted to exercise of those powers. The decision of the Supreme Court in Divisional Forest Officer v. Biswanath Tea Co. Ltd. (supra) relied upon by the learned counsel for the respondents does not help the respondents in view of the decisions of the Supreme Court relied upon by the learned counsel for the petitioner alluded above. The other two decisions relied upon by the learned counsel for the respondents also do not help the respondents and exclude the jurisdiction of this Court under Art. 226 of the Constitution. 12. Looking to the facts of the instant case, Cl. 4 of the tender agreement is extracted below :- "4. Earnest money :- Tender form must be accompanied by an Earnest Money of Rs._________ Rs. 1,66,000 (rupees one lakh sixtysix thousand) form of a crossed A/C Payee (not negotiable Demand Draft/Pay Order/Bankers Cheque/Deposit-at-call Receipt issued by the State Bank of India or a Scheduled Bank in favour of Sr. Regional Manager, Food Corporation of India, Shillong. Tenders not accompanied by Earnest Money in the form prescribed above shall be summarily rejected. 1,66,000 (rupees one lakh sixtysix thousand) form of a crossed A/C Payee (not negotiable Demand Draft/Pay Order/Bankers Cheque/Deposit-at-call Receipt issued by the State Bank of India or a Scheduled Bank in favour of Sr. Regional Manager, Food Corporation of India, Shillong. Tenders not accompanied by Earnest Money in the form prescribed above shall be summarily rejected. The earnest money shall be liable to forfeiture if the tenderer after submitting his tender resiles from or modifies his officer and/or the terms and conditions thereof in any manner, it being understood that the tender documents have been made available to him and he is being permitted to tender in consideration of his agreement to this stipulation. The earnest money is also liable to be forfeited in the event of the Tenderers failure, after the acceptance of his tender, to furnish the requisite security deposit by the due date without prejudice to any other rights and remedies of Corporation under the Contract of Law. The earnest money will be returned to all unsuccessful tenderers, as soon as practicable after decision on tenders and to a successful tenderer, after he has furnished a security deposit, if the successful tenderer does not desire the same to be adjusted towards the security deposit. No interest shall be payable on the amount of earnest money, in any case." 13. The penalty of forfeiture of earnest money falls under Cl. 4 where, the tenderer after submission of her tender resiles from or modifies her offer and/or the terms and conditions thereof in any manner. In the instant case, after the tenders were opened the petitioners tender was found fourth lowest, by letter dated 16-10-1996 (Annexure-2) as per earlier practice of the respondent No. 2, the petitioner made offer to work at the negotiated rate along with other contractors. The respondent No. 3 has treated the letter dated 16-10-1996 (Annexure 2) as deviation/modification of the terms of the tender earlier offered by the petitioner. The respondents have stated in their counter-affidavit that the respondents have the right to give their contract to more than one contractor for one transportation work, but it has not been denied on behalf of the respondents that earlier it was the practice of the respondents to appoint more than one contractor for one work at the negotiated rate. The respondents have stated in their counter-affidavit that the respondents have the right to give their contract to more than one contractor for one transportation work, but it has not been denied on behalf of the respondents that earlier it was the practice of the respondents to appoint more than one contractor for one work at the negotiated rate. So, if as per practice adopted by the respondent No. 3 earlier, the petitioner offered to work on the negotiated rate along with other contractors, it did not amount to modification or the deviation because the terms and conditions of the tender offered by the petitioner earlier. The view of the respondents that aforesaid letter dated 16-10-1996 (Annexure 2) amounted to modification/deviation of the earlier terms and conditions of the tender offered by the petitioner is erroneous. Therefore, the action of the respondent No. 3 is arbitrary, especially in view of the fact that this decision has been communicated by the respondents to the petitioner on 30-9-1999 in spite of a number of reminders by the petitioner right from 11-4-1997 up to 21-4-1999. 14. In the result, the petitioner is entitled to refund of the earnest money amounting to Rs. 1,66,000/-. Since the respondent No. 3 has unnecessarily withheld the earnest money of the petitioner, the petitioner is further entitled to interest @ Rs. 12 per cent. per annum with effect from 11-4-1997 till the payment is made. Further, the petitioner shall be entitled to costs of the petition. 15. With the aforesaid observations and directions, the writ petition is disposed of. Order accordingly.