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2003 DIGILAW 300 (JK)

Hakam Chand & Co. v. Union Of India

2003-10-03

S.K.GUPTA

body2003
Petitioner has sought a writ against the impugned action of respondents-1 to 3 in respect of the award of the contract for supply of buffalo milk to various Military Farms including Military Farms at Jammu, Udhampur, Baramula and Srinagar, by entering into negotiations with the Jammu Co-operative Milk Federation Limited, Respondent-4, in arbitrarily ignoring the lowest rates quoted by the petitioner and found in its tender offered in response to the Tender Notice No. 40131/MF/(DP)Cont/O.T. dated 3rd August, 2002 and were opened by the Board of Officers in the Office of Director Military Farms, Headquarter Northern Command on 11th September, 2002. 2. Petitioner is in the trade for the last 35 years and a registered Contractor with respondents-1 to 3 for the supply of buffalo milk. A tender was floated by respondents-1 to 3 vide Tender Notice No. 40131/MF(DP)/Cont/O.T. dated 3rd August, 2002, inviting tenders from the registered and eligible Contractors for the supply of buffalo milk. The petitioner also submitted the tender. It is further stated that on the opening of the tenders, rates quoted by the petitioner were found to be lowest. Respondents-1 to 3, instead of awarding contract for the supply of buffalo milk, entered into negotiations with the Jammu Co-operative Milk Federation Limited notwithstanding the rates quoted on much higher than the rates tendered by the petitioner. The sole grievance of the petitioner is that the action of the Authorities of the Union of India in awarding contract by negotiations is not in conformity with the standards and norms governing the allotment of public contracts established in a catena of cases by the Apex Court and the High Courts. That the departure of the Authorities of the Union of India from these norms and standards, in allotting the contract by negotiations, is arbitrary, irrational and unreasonable, and violative of the equality clause enshrined in Article 14 of the Constitution. 3. Respondents-1 to 3 in their reply admitted unambiguously that in response to the Tender Notice issued by them, the petitioner also submitted the tender. It was, however, stated that under the provisions of the Government of India, Ministry of Defence letter No. 7(1)/4531/D(QS) dated 6th September, 2000, negotiated milk contracts are to be concluded with NCDFI/State Co-operative Milk Federation, Jammu. Respondents-1 to 3 in their reply admitted unambiguously that in response to the Tender Notice issued by them, the petitioner also submitted the tender. It was, however, stated that under the provisions of the Government of India, Ministry of Defence letter No. 7(1)/4531/D(QS) dated 6th September, 2000, negotiated milk contracts are to be concluded with NCDFI/State Co-operative Milk Federation, Jammu. It is further stated that the Jammu Co-operative Milk Federation Limited is a State owned body and concluding the contract by negotiations with the Federation is neither in violation of settled principles governing the allotment of public contracts nor discriminatory and violative of guarantee contained in Article 14 of the Constitution. Respondents further stated that process has been initiated to finalize the contract with the Jammu Co-operative Milk Federation Limited, respondent-4, by negotiations in pursuance of the direction contained and issued in the aforesaid communication dated 6th September, 2000 and also the directions in QMG Army Headquarter vide their letter No. 011032/NC/QI(B) dated 17th December, 2002. Further stand of the respondents is that, their action to enter into negotiations with the Jammu Co-operative Milk Federation Limited, as per the order conveyed by the higher Authorities, is legal and valid. 4. It is not disputed that respondents-1 to 3 floated a tender for the supply of buffalo milk and in pursuant to the tender notice, the petitioner also submitted the tender. It is also not disputed that the petitioner is a registered and eligible Contractor for such contracts with respondents-1 to 3. The respondents also did not dispute in their reply that on the opening of the tenders by the Board of Officer of respondents-1 to 3 on 11th September, 2002, rates quoted by the petitioner were found to be lowest. It is also not in dispute that respondents-1 to 3, instead of awarding contract to the tenderer(s) quoting the lowest price, entered into negotiations with respondent-4, the Jammu Co-operative Milk Federation Limited, for supply of buffalo milk, despite the fact that the rates quoted by them were on much higher side than the petitioner. The tenderers, who had offered the tenders in response to the Tender Notice, were never called at the time of negotiations with respondent-4, i.e., the Jammu Co-operative Milk Federation Limited. 5. The tenderers, who had offered the tenders in response to the Tender Notice, were never called at the time of negotiations with respondent-4, i.e., the Jammu Co-operative Milk Federation Limited. 5. The sole controversy involved in this petition is as to whether after inviting tenders, respondents-1 to 3 can enter into a negotiation with the Jammu Co-operative Milk Federation Limited without the participation of the tenderers, including the one who had quoted lowest rates and award contract merely on the basis of instructions in a communication received from higher Authorities, directing the negotiated contract for supply of milk and milk products with the Jammu Co-operative Milk Federation Limited. The petitioner in this writ petition has questioned the negotiation for awarding contract to the Jammu Co-operative Milk Federation Limited without participation of the tenderers, who had offered the tenders, on the ground that it was arbitrary, mala fide and not in public interest. That the awarding of contract by negotiations to respondent-4, without affording an opportunity to others to compete and the same being not based on any rational or relevant principle, is violative of Article 14 of the Constitution and also the rule of administrative law, which inhibits the arbitrary action by the State. 6. In Kasturi Lal Lakshi Reddy v. State of Jammu and Kashmir, AIR 1980 SC 1992, the Apex Court while dealing with the order awarding contract by the Government observed as under: "Though ordinarily a private individual would be guided by economic considerations of self-gain in any action taken by him, it is always open to him under the law to act contrary to his self-interest or to oblige another in entering into a contract or dealing with his property. But the Government is not free to act as it likes in granting largess such as awarding a contract or selling or leasing out its property. Whatever be its activity, the Government is still the Government and is, subject to restraints inherent in its position in a democratic society. The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in an unprincipled manner, it has to be exercised for the public good. Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in an unprincipled manner, it has to be exercised for the public good. Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touch-stone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid." 7. Where the Government is dealing with the public in entering into contracts, the Government cannot act arbitrarily at its sweet will and like a private individual deal with any person as it pleases, but its action must be in conformity with some standards and norms, which are not arbitrary, irrational or irrelevant. An open auction guarantees fairness, as every one gets a chance to participate and the Government gets the best goods at lowest price. Even where the Authorities decide to enter into negotiations, it must invite all the tenderers/eligible registered Contractors and should not resort to pick and choose policy. The right of refusing the lowest or any other tender is always available to the Government, but the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing the tender. In case of awarding contract by negotiations, it is obligatory on the Authorities deciding to enter into negotiations that all competing tenderers should be invited for negotiations. When the negotiations have to follow, the competing parties, whose tenders are found to be valid, could not be subjected to different treatment in the manner of taking decision. 8. In case of awarding contract by negotiations, it is obligatory on the Authorities deciding to enter into negotiations that all competing tenderers should be invited for negotiations. When the negotiations have to follow, the competing parties, whose tenders are found to be valid, could not be subjected to different treatment in the manner of taking decision. 8. In this case, the letter dated 28th October, 2002 indicating that QMG has directed that all contracts of milk and dairy products of Mil Farms of Northern Command will be pended till the issue of negotiated contracts with the Jammu Co-operative Milk Federation Limited is decided at the Headquarters, neither conforms to the established principles governing the allotment of public contracts nor the procedures and norms laid down by the Apex Court in catena of cases. This communication was further followed by a letter dated 17th December, 2002 addressed to Headquarters, Northern Command, (Q Ops); Udhampur, J&K by QMGs Branch, Army Headquarters, New Delhi, pertaining to the supply of milk under negotiated contract, directing the conclusion of the negotiated contracts with the Jammu Co-operative Milk Federation Limited for supply of milk to Northern Command for Jammu, Udhampur, Srinagar, Rajouri, Nowshera and Baramulla. It is significant to point out that the manner in which the decision has been taken so as to consider and call only one party for negotiations to the exclusion of the others, cannot be said to be fair, rational, reasonable and relevant. The decision making Authority has to be fair because the principle of fairness is inherent in the requirement of following natural justice and such agencies and instrumentalities while taking decision have to follow the principles of natural justice and minimum standards of fairness. On overall basis having regard to the terms and conditions and in totality, the petitioner could not be excluded altogether from negotiations and should have been called for negotiations across the table for the supply of milk in the interest of justice. Hence I find that it is a case of breach of rule of natural justice, which inheres the principles of fairness. Even if a body has to take a decision, that decision has to be rational and if any power is exercised in arbitrary manner, then also the resultant decision stands vitiated. Hence I find that it is a case of breach of rule of natural justice, which inheres the principles of fairness. Even if a body has to take a decision, that decision has to be rational and if any power is exercised in arbitrary manner, then also the resultant decision stands vitiated. If the decision to accept tender for awarding contract has to be reached by process of negotiations, the petitioner could not be excluded from negotiations and should have been called along with other valid and eligible tenderers, if any, instead of choosing to deal with any person it pleases. The policy adopted, as is exacted from the two communications of the official-respondents referred to above dated 28th October, 2002 and 17h December, 2002, is capricious and not being informed by any reason whatsoever, is clearly held to be arbitrary and founded on mere ipse dixit of the executive functionaries thereby offending Article 14 of the Constitution. It may not be out of place to mention that this case certainly lays down the scope of judicial review and relevant principles to be followed in such cases. The apex Court in Tata Cellular v. Union of India, AIR 1996 SC 11, has observed that: ".....The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of courts ability to quash an administrative decision on its merits" 9. According to the Supreme Court these restraints bear hallmarks of judicial control over administrative action. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself. 10. The respondents, in this case, have not given due consideration to all eligible Contractors including the petitioner and are concluding the contract by negotiations with respondent-4, as is clearly elicited from their communications referred to above and admitted in their reply in unequivocal terms. So, when it is done in case of one party and that too have its higher rates than the rival offers of the petitioner, it is manipulation and not negotiations in tending to confer undue benefit to that party. So, when it is done in case of one party and that too have its higher rates than the rival offers of the petitioner, it is manipulation and not negotiations in tending to confer undue benefit to that party. In these circumstances, it is not possible to hold that the action of the respondents in negotiating with respondent-4, the Jammu Co-operative Milk Federation Limited, to the exclusion of the petitioner whose tender admittedly was lowest, was not discriminatory and free from arbitrariness. It appears that the entire exercise was conducted to find the contract to be awarded to respondent-4 by negotiation only to the exclusion of the petitioner and other eligible Contractors, if any. The action of the respondents naturally becomes arbitrary, unfair and unreasonable, liable to be struck down, being violative of the principles enshrined in Article 14 of the Constitution. 11. Mr. S.S. Nanda, Senior Standing Counsel for Central Government representing respondents-1 to 3, when carried through the communications and the established legal proposition in case of awarding contract by negotiations, he could not justify the action of the Authorities of the Union of India in negotiating with respondent-4 to the exclusion of the petitioner. 12. In the result, the petition succeeds and is hereby allowed. The communications dated 28th October, 2002 and 17th December, 2002, directing negotiations with respondent-4, the Jammu Co-operative Milk Federation Limited, for awarding contract for supply of milk to the exclusion of the petitioner, being unfair, unreasonable, arbitrary and violative of principles of natural justice, are hereby quashed. The Authorities of the Union of India are directed to issue fresh advertisement and proceed in accordance with law expeditiously, preferably within one month from today, for awarding the contract by tender process; and in case of holding negotiations, due consideration shall be accorded to the offer of the petitioner and all eligible Contractors/Tenderers, so as to be in tune with the principles of equality enshrined in Article 14 of the Constitution. 13. Petition is disposed of in the terms indicated above.