Judgment : M. Y. EQBAL, J. ( 1 ) IN this writ application the petitioner has challenged the validity of the extension of Settlement of bus stand at the instance of respondents Nos. 4 and 5 in favour of respondent No. 6 for the period upto 2003. A prayer has been made for quashing such settlement and for issuance of appropriate direction upon the concerned respondent for settlement of the said bus stand in accordance with the established procedure of settlement. ( 2 ) THE bus stand, namely, Kanta toli bus stand is a Government place under the control of respondent No. 4, Ranchi Regional Development Authority (in short R. R. D. A. ). Petitioners case is that since 1991 the R. R. D. A. used to settle the said bus stand by inviting tender for a period of one year and for appointment of a contractor for the purpose of collecting toll from the bus owners. In 1999 tender was invited by the authority in the newspaper, namely, Ranchi Express dated 9-1-99 for a period of one year i. e. 1999-2000 and tender value was fixed at Rs. 16,11,500/ -. It is stated that respondent-R. R. D. A. ignoring the guidelines and policy settled the bus stand with respondent No. 6 for the period 1999-2000 and the value of contract was fixed at 14. 75 lakhs. Petitioners further case is that the petitioner and other organisations filed representations before the authority stating inter alia that the settlement was made by adopting wrong procedure. It is stated that again on 18-1-2000 another notice was published in the newspaper inviting tender for appointment of contractor for ran Basera situated in Birsa Bus Stand (Kanta toli bus stand) but the authority in connivance with respondent No. 6 again appointed him as a contractor. Petitioners further case is that depsite respondent No. 6 violated all the terms and conditions of settlement and became defaulter, respondent authority instead of making fresh settlement of the bus stand for the subsequent year i. e. 2000-2001, extended the settlement upto 2003. Petitioner and others made serious objection and filed several representations but nothing was done. Petitioner therefore, claims that extension of the original settlement for the period 1999-2000 to 2003 is absolutely illegal, arbitrary, capricious and mala fide. ( 3 ) A counter-affidavit has been filed by respondents Nos. Petitioner and others made serious objection and filed several representations but nothing was done. Petitioner therefore, claims that extension of the original settlement for the period 1999-2000 to 2003 is absolutely illegal, arbitrary, capricious and mala fide. ( 3 ) A counter-affidavit has been filed by respondents Nos. 4 and 5, namely, R. R. D. A. In the counter affidavit it is admitted that in 1999 settlement of the bus stand was made in favour of the respondent No. 6 for the period 1999-2000 and the minimum bid was fixed at Rs. 16,11,500/ -. However, it is stated that only three persons who participated in the auction, did not agree to call the bid on the fixed amount of Rs. 16,11,500/ -. Consequently, the then Vice-Chairman of the R. R. D. A. permitted them to call the bid at Rs. 14,50,000/- and ultimately, the settlement was awarded to the highest bidder, namely, Sri Saud Alam, respondent No. 6 who bid at Rs. 14,75,000/ -. Further case of R. R. D. A. is that on 16-6-99 respondent No. 6 submitted application before the authority requesting that contract period be extended till the year 2003 on the ground that his income had decreased because the buses started from Ratu Road, Main Road and Dhurwa bus stand as a result of which he could not pay the instalments in time. The aforesaid application of respondent No. 6 was considered by the authority and it was felt that the authority needed assured income for the development of the proposed bus terminus. Respondent-R. R. D. A. further justified the extension on the ground that while inviting auction each year, unwanted elements came to the authority and unnecessary expenditure is incurred. It is further stated that the R. R. D. A. felt that for development of proposed Birsa Bus Terminus, apart from the time factor, peace was very much essential as group clashes were apprehended if auction was held each year. Consequently, to avoid all these, it was decided to extend the period of the contract as per the terms of the Agreement to three years @ Rs. 14,80,000/- for the period 2000-01; Rs. 14,85,000/- for the period 2001-02 and Rs. 15,00,000/- for the period 2002-03. Consequently, to avoid all these, it was decided to extend the period of the contract as per the terms of the Agreement to three years @ Rs. 14,80,000/- for the period 2000-01; Rs. 14,85,000/- for the period 2001-02 and Rs. 15,00,000/- for the period 2002-03. ( 4 ) RESPONDENT No. 6 Contractor also filed counter-affidavit stating inter alia that the writ application at the instance of petitioner is not maintainable and that to after the expiry of more than two years. It is stated that the bus stand was settled with the respondent in accordance with law by the competent authority in July-August, 1999. Therefore, petitioner as a Society came into existence only on 29-4-2000 has no locus standi to challenge the settlement made by the respondent in his favour. ( 5 ) MR. A. K. Sinha, Senior counsel appearing for the petitioner assailed the impugned decision of the respondent R. R. D. A. in extending the period of settlement as being illegal, arbitrary and unreasonable and mala fide. Learned counsel firstly submitted that in the year 1999 a general tender was invited for settlement of bus stand for a period of one year and the bus stand was in fact settled with respondent No. 6 for a period of one year i. e. 1999-2000. In that view of the matter respondent, R. R. D. A. had noauthority under the law to extend the period of settlement privately in violation of Article 14 of the Constitution of India. Learned Counsel relied upon the decision of the Supreme Court in the case of United Periodicals Pvt. Ltd. v. M/s. M and N Publications Ltd. , (1993) 1 SCC 445 . ( 6 ) MR. Tapan Sen, learned counsel appearing for the R. R. D. A. on the other hand submitted that the action of that R. R. D. A. is neither arbitrary nor mala fide, inasmuch as extension of settlement was done in the public interest and for the development of proposed Birsa Bus Terminus and also in order to avoid group clashes which was apprehended if auction was held each year. According to the learned counsel the decision of R. R. D. A. needs no interference by this Court in absence of proof of mala fide. ( 7 ) MR. According to the learned counsel the decision of R. R. D. A. needs no interference by this Court in absence of proof of mala fide. ( 7 ) MR. Debi Prasad, learned Senior counsel appearing for respondent No. 6 submitted that extension of the settlement of bus stand up to 2003 was done in terms of the original agreement and before extension respondent No. 6 was directed to deposit the amount. Learned counsel submitted that the instant writ application was filed one year after extension was published in the newspaper. Learned counsel relied upon the decision of the Apex Court in the case of M. P. Oil Extraction Ltd. v. State of M. P. , (1997) 7 SCC 592 . ( 8 ) BEFORE appreciating the rival submissions made by the learned counsels, I would first like to discuss the principles laid down by the Apex Court in relation to State action in the matter of contractual obligations with private parties. ( 9 ) IT is well settled that the State or its instrumentality entering into a contract with private parties acts in its executive power under Article 298 of the Constitution. Its decision to enter or not to enter into the contract is thereby open to challenge on the ground of violation of Article 14 or any other grounds available in the public law field. It is equally well settled that the State action in commercial or contractual transaction with private parties must be in confirmity with Article 14 of the Constitution of India. The discretion of the State in such matter is not absolute but guided by some norms and procedure. ( 10 ) IN the case of Tata Cellular v. Union of India, (1994) 6 SCC 651 : ( AIR 1996 SC 11 ), the Apex Court while considering the scope of judicial review in Government contracts held that the principle of judicial review would apply to the exercise of contractual power by Government body in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. Notwithstanding, the fact that while dealing with such matter the state is expected to protect the financial interest of the State. But the principles laid down under Article 14 of the Constitution of India have to be kept in view while accepting or refusing a tender. However, there are inherent limitations in exercise of that power of judicial review. Notwithstanding, the fact that while dealing with such matter the state is expected to protect the financial interest of the State. But the principles laid down under Article 14 of the Constitution of India have to be kept in view while accepting or refusing a tender. ( 11 ) IN the case of Sterling Computers Ltd. v. M and N Publications Ltd. ( AIR 1996 SC 51 ) (supra) the fact was that for publication of telephone directories for Delhi and Bombay the tender of United India Periodical Pvt. Ltd. (U. I. P.) was accepted. An agreement dated 14-3-87 was executed by Mahanagar Telephone Nigam Ltd. (MTNL) whereunder U. I. P. was to publish directories every year for the period of five years from 1987 to 1991 and also to fulfill other conditions under the agreement. The U. I. P. defaulted and committed breach of the terms of agreement inasmuch as directories for Delhi were published only for the year 1987 and 1988 and for Bombay for the year 1987. There was no publication of directories in the year 1989, 1990 and 1991. However, the U. I. P. approached the M. T. N. L. with a package of proposal so that they may be bailed out of their financial problems and uninterrupted supply of directories. Ultimately the Board of M. T. N. L. took a decision that the extension of contract be given to U. I. P. and Sterling Computers for printing 13 issues of directories for Delhi and Bombay. Accordingly, a supplementary agreement was entered into in September, 1991. The supplementary agreement was challenged on the ground that in the garb of supplementary agreement a fresh contract was awarded to Sterling Computers for freshperiod of 1991-97 on fresh terms and conditions without inviting tenders or affording opportunity to others to submit tenders. When the matter came to the Apex Court, their Lordship held that (Para 26) :"the cases aforesaid on which reliance was placed on behalf of the appellant, have also reiterated that once the State decides to grant any right or privilege to others, thenthere is no escape from the rigour or Article 14, the executive does not have an absolute discretion, certain precepts and principles have to be followed, the public interest being the paramount consideration. It has also been pointed out that for securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner. However, there may be cases where in the special facts and circumstances and due to compelling reasons which must stand the test on Article 14 of the Constitution, departure of the aforesaid rule can be made. This Court while upholding the contracts by negotiation in the cases referred to above has impressed as to how in the facts and circumstances of those cases the decisions taken by the State and the authorities concerned were reasonable, rational and in the public interest. The decisions taken in those cases by the authorities concerned, on judicial scrutiny were held to be free from bias, discrimination and under the exigencies of the situation then existing to be just and proper. On the basis of those judgments it cannot be urged that this Court has left to the option of the authorities concerned whether to invite tenders or not according to their own discretion and to award contracts ignoring the procedures which are basic in nature, taking into account factors which are not only irrelevant but detrimental to the public interest. " ( 12 ) COMING back to the instant case admittedly in 1999 settlement of the bus stand was made in favour of the respondent No. 6 for a period of one year on certain terms and conditions. The question whether respondent No. 6 defaulted in making payment of instalments is not relevant. The only relevant question is whether respondent, R. R. D. A. was justified in extending the settlement up to 2003 on justifiable reasons. The case of the respondent, R. R. D. A. in the counter-affidavit is that during the subsistence of the agreement respondent No. 6 approached the R. R. D. A. for extension of the agreement till 2003. The said application was considered by the authority and it was felt that the authority needed assured income for the development of proposed Birsa Bus Stand. The whole defence of R. R. D. A. has been stated in paragraph 10 of the counter-affidavit which reads as under :"that the aforesaid application of Mr. The said application was considered by the authority and it was felt that the authority needed assured income for the development of proposed Birsa Bus Stand. The whole defence of R. R. D. A. has been stated in paragraph 10 of the counter-affidavit which reads as under :"that the aforesaid application of Mr. Saud Alam (Respondent No. 6) was considered by the authority and it was felt that the authority needed assured income for the development of the proposed Birsa Bus Terminus. It was also noted that while inviting auction each year, unwanted elements came to the authority and unnecessary expenditure was incurred. Previously, one contractor, namely, Narendra Pratap Singh did not deposit Rs. 81,750/- of the bid amount of the year 1995-96 and for which the authority had to file a case against him. It was also felt that for the development of the proposed Birsa Bus Terminus, apart from the time factor, peace was very much essential as group clashes were apprehended if auction was held each year. Consequently, to avoid all these, it was decided to extend the period of the contract as per the terms of the agreement to three years @ Rs. 14,80,000 for the period 200-01; Rs. 14,85,000/- for the period 2001-02 and Rs. 15,00,000/- for the period 2002-03. " ( 13 ) THE question therefore arises whether the State or its instrumentality can ignore Article 14 of the Constitution of India and the Rules and procedure particularly in the matter of tender on the ground that some unwanted elements may participate in the tender and unnecessary expenditure has to be incurred for inviting a fresh tender. In my opinion the authority cannot and shall not be allowed to violate Article 14 of the Constitution of India on the ground that in the process of making settlement the authority has to incur expenditure. There is no bar for making settlement of the bus stand for more than one year and if the authority was of the view that one year settlement of the bus stand cause unnecessary harassment and expenditure then they could have settled the same for three years or five years but by inviting fresh tender and after complying the requirement of Article 14 of the Constitution of India. ( 14 ) REGARD being had to the entire facts and circumstances of the case, I am of the opinion that the extension of settlement of the bus stand for the period up to 2003 is not justified. However, by virtue of the supplementary agreement of extension respondent No. 6 already availed theagreement for one year i. e. 2000-01. It is, therefore, desirable that for the period of 2001-02 and for the subsequent periods respondent, R. R. D. A. shall make fresh settlement after inviting tender and following the rules and the procedure and also mandate of Article 14 of the Constitution of India. Needless to say that respondent No. 6 may if so advised participate in the said tender and his case shall be considered sympathetically for the reasons that before or after execution of supplementary agreement he has fulfilled the conditions imposed by the respondent, R. R. D. A. ( 15 ) THIS writ application is therefore allowed with the aforesaid observation and direction. Application allowed. --- *** --- .