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2004 DIGILAW 547 (KER)

United Umbrella Mart v. State of Kerala

2004-11-10

J.B.KOSHY, K.P.BALACHANDRAN

body2004
Judgment :- Koshy, J. Second respondent Plantation Corporation of Kerala Limited invited tenders for the supply of umbrellas for their workers. Ext.P2 is the tender notice. Ext.P3 is the tender conditions for the supply of materials. It is not disputed that second respondent is a government company and they cannot discriminate between persons. Petitioner respondent to the tender notice and sealed tender was submitted. Though petitioner was the lowest in terms of the tender notice, they were not awarded the contract. Apart from that, the third respondent who did not participate in the tender proceedings at all, was awarded the contract. Third respondent did not submit a sealed tender as required in the tender notice within the time prescribed. It is stated as follows in the statement submitted by the second respondent: “In 1998 also tenders were invited for purchase of umbrellas. 10 parties including the petitioner submitted tenders. The 3rd respondent did not submit their tender within the stipulated time, namely, on or before 17-11-1998. However, by quotation dated 23-11-1988, the 3rd respondent quoted for two types of umbrellas.” That shows that the last date for submission of the tender was 17-11-1998. However, third respondent quoted only on 23-11-1998. When petitioner quoted Rs.89-50, third respondent quoted Rs.102/- per piece for one type of umbrella, that is, Femina – Two fold and Rs.115/- per piece for another type, that is Rani – Two fold. Ext.R2 (b) reveals that two other parties also quoted Rs.90/- per piece. One of them gave a conditional offer to supply it at a lower rate if the entire umbrellas are to be supplied before a particular date. The lowest tender without any condition was of the petitioner. The reason for getting samples from third respondent is Ext.R2 (a) letter. It is stated in paragraph 2 of the statement filed by the second respondent as follows: “The Plantation Corporation of Kerala Limited supplies umbrella to its workers every year as per section 17 of the Plantation Labour Rules, 1959. In 1996, as per letter dated 15-3-1996, the 1st respondent directed the Plantation Corporation of Kerala Ltd., to meet its umbrella requirements, as far as possible, by direct purchase from the State Farming Corporation of Kerala Ltd., the 3rd respondent in the original petition, which is a government company and which has an umbrella manufacturing unit, instead of purchasing from the open market. A true copy of the said letter is produced herewith marked Ext.R2 (a). However, the 2nd respondent can supply only the umbrella approved by the Chief Inspector of Plantations as provided under rule 70 of the Plantation Labour Rules.” We quote the operative portion of Ext.R2 (a) which is as follows: “You may be aware that the State Farming Corporation of Kerala has started an umbrella manufacturing unit with financial assistance from Tribal Sub Plan Scheme with a view to give employment opportunities and training to Tribals in umbrella manufacturing. The State Farming Corporation of Kerala is now in a position to cater to the umbrella requirements of your company. As the company has no established marketing facilities, I am to request you to meet your umbrella requirements as far as possible by direct purchase from the State Farming Corporation of Kerala instead of getting the supplies from the open market.” Ext.R2 (a) was issued on 15-3-1996 whereas this tender was issued in 1998. If the petitioner was acting on the basis of Ext.2 (a), which was issued in 1996, petitioner could have called for samples from the third respondent and submitted to the chief inspector of plantations before going in for purchasing the umbrellas from the open market. If samples were approved, they could have finished the matter and they need not have invited tenders. Third respondent also need not have undertaken all these trouble by calling for tender etc. incurring further expenses. Ext.R2 (d) shows that Chief Inspector of Plantations approved the samples given by the second respondent. It does not mention anything about the samples supplied by the other parties. In view of Ext.P2 tender notice and Ext.P3 tender conditions after issuing Ext.P2 in 1998, second respondent cannot rely on Ext.R2 (a) which was issued in 1996 for concluding a contract with a party who did not respond to the tender notice in time without canceling the tender and calling for new applications. 2. It is settled law that a Government Corporation cannot act like a private corporation while making contracts and its actions are to be based on standards, which are not arbitrary and capricious for the choice of person with whom it will deal. (See: Ramana Dayaram Sheety v. International Airport Authority of India ((1979) 3 SCC 489), (para 12) and Erusian Equipment and Chemicals Ltd. v. State of West Bengal (AIR 1975 SC 266). (See: Ramana Dayaram Sheety v. International Airport Authority of India ((1979) 3 SCC 489), (para 12) and Erusian Equipment and Chemicals Ltd. v. State of West Bengal (AIR 1975 SC 266). It is true that for valid reasons State can necessarily reject the lower quotation. But, it cannot accept a quotation, which was not given in time as fixed in the tender notice. If none of the samples given by the parties who responded to the tender were approved, it was perfectly free to call for fresh quotation. Court, in the process of judicial review, cannot act as appellate authority and weigh the pros and cons in a golden scale. Court cannot substitute its reasons in the matter of finalization of contract but it shall be done in a fair and balanced manner. The State need not enter into contract with anyone; but when it does so, it must do fairly without discriminating and without unfair procedure. State cannot act arbitrarily and grant any largesse violating the procedure and mandates of article 14 of the Constitution of India. As held by the Apex Court in Shrilekha Vidyarthi Kaur v. State of UP ((1991) 1 SCC 212), non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every public functionary, in whatever sphere, must be gauged by reasonable fair procedure. Such action is open to judicial review in contractual matters also. But, as held in Style (Dress Land) v. Union Territory of Chandigarh and another ((1999) 7 SCC 89), courts are concerned with decision making process and not the decision itself. Here, the procedure adopted was wholly discriminatory and unfair. Accepting a much higher quotation from a party, who did not make a quotation in time, is unreasonable. As Lord Diplock held in Council of Civil Service Unions v. Minister for the civil service ((1984) 3 ALL ER 935), ‘procedural impropriety’ is one of the ground for exercising judicial review apart from ‘irrationality and illegality’. The famous case of Associated Provincial Pictures Houses Limited v. Wednesbury Corporation ((1947) 2 ALL ER 680), known as ‘The Wednesbury Case’, lays down the basic principles of judicial review. These principles are approved by the Apex Court in Union of India v. Ganayutham ((1997) 7 SCC 463) and Indian Railway Construction Co. Ltd. v. Ajay Kumar ((2003) 4 SCC 579). These principles are approved by the Apex Court in Union of India v. Ganayutham ((1997) 7 SCC 463) and Indian Railway Construction Co. Ltd. v. Ajay Kumar ((2003) 4 SCC 579). Apex Court repeatedly held that the test is to see whether there is any infirmity in the decision making procedure and not in the decision itself. Here, admittedly, procedure is violated by accepting a quotation which was not given at the stipulated time in the tender notice, that too, with 25% higher price than that was quoted by the petitioner. But, we note that period for the supply of umbrellas is over and third respondent has already supplied the materials. The petitioner had to undergo all these process and to approach this court also and to spend expenses. Therefore, even though no relief is given on merit, second respondent is bound to compensate the petitioner and second respondent is directed to give Rs.10,000/- as cost to the petitioner/appellant. The writ appeal is disposed of accordingly.