JUDGMENT [ENTITY], J.
(1) Since both these writ petitions involve common question for decision the same arc being disposed of by this judgment.
(2) In these writ petitions, the petitioners have challenged the action on the part of respondents 1 to 3 in fixing two different prices for the supply of railway bogies of the same specification manufactured by different manufacturers thereby giving undue favor to respondents 4 to 12 causing approximately a loss of Rs.20 crores to the Government of India.
(3) Since the facts in both the writ petitions are identical, it may be sufficient to set out the facts in [CASE NUMBER] to provide a factual background. The petitioners are regular suppliers of railway bogies along with respondent 4 1013 to respondents 1 to 3 for the last about 8 years. Prior to the year in question i.e. 1992-93 respondents 1 to 3 had been placing orders on these manufactures at the uniform price per bogie. For the period in question (i.e. 1-4-1992 to 31-3-1993) the respondent Railways issued tender ' enquiry No.91/RS(PF & EC/951/CSB/16/TC for the supply of 19,000 bogies. In the tender enquiry it was, inter alia, stated that the Railways reserve the right to order additional quantity up to 30 per cent of the ordered quantity during the currency of the contract on (he same price and terms and conditions with suitable extension in delivery period. It was also stated therein that the price was subject to the price variation clause and the base date for the purpose of escalation was 1-9- 1991. It was further stated that the tenderers were at liberty to tender for the whole or any portion or to state in the tender the quantity. The offers were to remain open for a period of 90 days for acceptance. Pursuant to the aforesaid tender enquiry both the petitioners as well as respondents 4 to 13 and two new manufacturers submitted their tenders to the Railways.
(4) As stated in the counter affidavit filed on behalf of respondents 1 to 3 on 1-4-1992, the tenders were opened on 27th November, 1991 and the quotations received and quantity offered were as follows:- S.No Firm Qtx. Offered & Rate (Rs.). 1. [ENTITY] 19.000 & 84.510 2. [ENTITY] 1,750 & 83.950 3. [ENTITY] 5.000 & 84,100 Steel 4. [ENTITY] (Bhilai 19,000 & 84,350 Engg. Corp.) 5. [ENTITY] 19,000 & 84,980 6. Sri [ENTITY] 19,000 & 84.600 7. [ENTITY] 19,000 & 84,750 8. [ENTITY] 1,500 & 83,000 9. Cimmco 2,000 & 84,800 10. [ENTITY] 19,000 & 77,666 11. [ENTITY] 19,000 & 77.666 12. [ENTITY] 19,000 & 77,666 New Sources 13. [ENTITY] 200 & 75.000 14. Simplex 500 & 78,100 (5) It will be seen from the above that the lowest tenders received was Rs.77,666.00 and the same was from three established suppliers, namely, both the petitioners and M/s. [ENTITY] (respondent No.13). It is the admitted case of the parties that after the tenders were opened and before the same could be finalised, the Government of India announced two major concessions, namely, the reduction of Customs duty on the import of steel scrap and dispensation of the freight equalization fund for steel. Keeping in view the aforesaid two concessions, the petitoiner [ENTITY] by their letter dated 4th February, 1992 informed the Member Mechanical Railway Board that they were in a position to offer substantial reduction on the quoted price in case negotiation meeting similar to that as had been done in case of Ht coupler/draft gear was called. Similarly, petitioner [ENTITY] in their letter dated 4th February, 1992 stated that they, in a spirit of co-operation with the Indian Railways, wanted to substantially reduce their prices .if a negotiation meeting could be called before finalisation of the contract. No reply to these letters was received by the petitioners from the Railways. Meanwhile, the Railways addressed telegram dated 24th February, 1992 to the petitioners and other suppliers to extend the validity of their offer by 60 days more. While extending the offer by 60 days more, as desired by the Railways, the petitioner [ENTITY] vide letter dated 27th February, 1992 also revised their price per bogie in the said letter. The revised offer was Rs.68,000.00 per bogie. It was further started that a discount of RS.1000.00 per bogie would be given if the ordered quantity was more than 5000 in number. Similarly, the petitioner [ENTITY] vide their letter dated 3rd March, 1992 reduced the price to Rs.69,000.00 per bogie.
(6) It may be relevant to point out here that after a counter-offer of Rs.65,000.00 per bogie was given by the Railways to these two petitioners and M/s. [ENTITY], the petitioners [ENTITY] and [ENTITY] by their letter dated 26th March, 1992 had offered the price as Rs.67,000.00 per bogie without any quantity restriction.
(7) Respondent No.3 vide his communication dated 18th March, 1992 informed the petitioners and respondent No.13 ([ENTITY]) that the Railway Board intended to place orders for 1795, 2376 and 2500 bogies respectively at a price of Rs.65,000.00 per bogie (RS.1000.00 per bogie payable extra in respect of bogie suitable for 22.9 tonnes axle load). It was further stated that the quantity proposed to be ordered was subject to purchaser's right to increase the quantity by 30 per cent in terms of option clause. The deliveries were required to commence from April 1992 and to be completed by January 1993. It was also stated therein that the placement of formal contract would be considered on receipt of their unqualified acceptance to this counter-offer. On the same date p:'6 respondent No.3 addressed communications different from the aforesaid communication to respondents 4 to 12 wherein it was stated that the Railway Board intended to place orders for 1477, 2080, 500, 1560, 2028, 1495, 1365, 1820 and 1560 bogies respectively including 30 per cent option clause at a price of Rs.76,000.00 per bogie (RS.1000.00 per bogie being payable extra in respect of bogie suitable for 22.9 tonnes axle load). It was also stated that the deliveries are required to commence from April 1992 and to be completed by March 1993 and formal contracts will be considered on the receipt of unqualified acceptance to this counter-offer.
(8) The fixation of two different prices i.e. Rs.65,000.00 per bogie in case of petitioners and respondent No.13 and Rs.76,000.00 per bogie in case of respondents 4 to 12 for the supply of railway bogies of the same specification has been challenged in these two writ petitions.
(9) The above writ petitions came up for hearing on 23rd March, 1992 and this Bench issued notice to the respondents to show cause as to why rule nisi be not issued, returnable on 2nd April, 1992. Respondents No.1 to 3 were also directed not to finalise the tenders till further orders and they were also directed to produce the. file containing tender forms on the next date of hearing. After the stay order dated 23rd p:'6 March, 1992 passed by this Court was communicated to the respondent Railways, the said respondent issued order dated 27th March, 1992 to respondent No.4. By this order respondent No.4 was informed that the quantity ordered for supply of bogies for the year 1991-92 has been amended and the quantity should now be read as 1227 numbers in place of 702 numbers. It was further stated in this letter that the payment for the supply of the additional 525 bogies will be made at Rs.71,900.00 per bogie plus taxes and duties etc., as per the base price in the contract of that order and escalation/de-escalation will be worked out later on the basis of the price which will be settled in the tenders under consideration with the Board. It was also stated in this letter that quantity under this amended order will be set off against the quantity in the contract under finalisation. Similar orders for the supply of additional bogies were issued to respondents No.5 to 12. Since the said order dated 27th March, appeared to have been issued with a view to frustrate the stay order pa.ssed by this Court on 23rd March, 1992, the operation of the said order was stayed by this Bench on 1st April, 1992.
(10) Thereafter the writ petitions came up for hearing on 2nd April, 1992 and after hearing the learned counsel for the parties [SECTION] was issued in both the writ petitions and we directed that the writ petitions be listed for hearing on 28th April, 1992. On the application for stay we directed that till further orders, the Ministry of Railways would accept the allocation of bogies recommended by the Tender Committee from the various manufacturers mentioned in column 5 of Annexure-"B" to the rejoinder at Rs. 67.000.00 per bogie and the Ministry would not purchase more than the aforesaid recommended allocation nor would pay price to any manufacturer higher than Rs.67,000.00 per bogie subject to the final decision of the writ petitions.
(11) It may be pointed out here that the above mentioned order dated 2nd April, 1992 passed on the application for stay was challenged in the Supreme Court. The Supreme Court vide order dated 28th April, 1992 held that the aforesaid orders do not call for interference. The Supreme Court, however, directed that during the pendency of the writ petitions if any of the suppliers in terms of the package of distribution indicated by the High Court seek "on account" payment representing the difference between a sum of Rs.67,000.00 intended as price by the High Court and a sum of Rs.76,000.00 contemplated by the Railways, the order of the High Court would not prohibit the making of such "on account" payment to such suppliers on each bogie on the condition that the said "on account" payment of Rs.9000.00per bogie should be covered by a bank guarantee for its prompt repayment together with interest at the rate of 20 per cent per annum in the event the "on account" payment cannot be absorbed in the price structure that may ultimately come to be determined pursuant to the final decision in the writ petitions.
(12) Mr. [ENTITY], Senior Advocate, learned counsel for the petitioner in [CASE NUMBER] made the following submissions. 1. That the award of contracts to respondents No.4 to 12 at Rs.76,000/ - per bogie was in total violation of the accepted norms and pecuniary advantage has been given to these respondents at the cost of the State exchequer. The amount of loss likely to be caused to the Government in awarding the said contracts in favor of respondents No.4 to 12 would be in the range of Rs.l9.75 crores. 2. The next submission was that the Railways had been ordering for supply of the bogies for the last many years and during all these years, the lowest rate quoted has been further reduced and counter offers made to all others who had tendered at rates higher than the lowest rate to bring them down to the lowest order, However, this year the petitioners' offer of Rs.67,000.00 per bogie has further been reduced to Rs.65,000.00 per bogie but for identical bogies respondents No.4 to 12 have been allowed Rs.11,000.00 per bogie more at the cost of the exchequer for ulterior motives best known to the Ministry of Railways. 3. The next submission of the learned counsel was that the petitioners in these writ petitions and M/s. [ENTITY] have been punished by respondents No.1 to 3 simply because they quoted a price in the tender which has been held to be reasonable even by the Railways in their counter affidavit. In this connection he drew our attention to para 4 of the counter affidavit filed on 1st April, 1992 wherein it has been stated that the last contract was awarded at a price of Rs. 71.900.00 per bogie and applying the price variation formula, the up-dated price as on 1-9-1991 worked out to Rs.79,305.00. He submitted that at the time of submission of tenders the index figures as on 1-9-1991 were not available and the same were available only as on 1-7-1991 and in terms of the said index figures, the up-dated price as on 1-7-1991 comes to Rs.77.666.00 and as on 1-9-1991 comes to Rs.79,305.00. He further drew our attention to para 6 of the said counter affidavit wherein it has been admitted that after the tenders were opened and before the same could be finalised, the Government of India announced two major concessions, namely, the reduction of Customs duty on the import of steel scrap and dispensation of the freight equalization fund for steel. He, therefore, contended that keeping in view of the said two concessios, the petitoiner [ENTITY] reduced the price to Rs.67,000.00 per bogie. He also drew our attention to para 5 of the abovementioned counter-affidavit which contains the quotations received from the various suppliers and which have been reproduced hereinabove. It will be seen from those quotations that the price quoted by the petitioners and M/s. [ENTITY] was Rs.76,666.00 per bogie which, as explained hereinabove, was a reasonable price even according to the Railways, but the price quoted by respondents No.4 to 12 was between Rs.83.000.00 to Rs.84.980.00 per bogie which admittedly was not the reasonable price. The learned counsel, therefore, submitted that the petitioner could not be punished by the Railways for quoting a reasonable price by further reducing the minimum price of Rs.67,000.00. 4. Another submission made by the learned counsel for the petitioner was that the tender has been finalised on 18th March, 1992 but the petitioner on 4.2.1992 itself had requested the Railway Board for negotiation meeting for substantial reduction in price. He submitted that Annexure-C to the supplementary affidavit dated 21st July, 1992 Filed by the Railways indicates that similar negotiations were held by the Railways in respect of the tenders pertaining to 1990-91. This Annexure further shows that the Railways had been fixing the lower price than the up-dated price even in the earlier years also. This Annexure indicates that the contractual price more or less has been on the basis of the minimum price quoted by any one of these 12 suppliers. 5. The next submission made by the learned counsel was that the petitioner has been treated adversely by the Railways for quoting a reasonable price even regarding allocation of bogies. He submitted that whereas on the basis of a well settled policy, the Tender Committee has recommended 2874 bogies, the said quantity was reduced to 1795 by the Approving Authority. 6. The last submission made by the learned counsel was that the effect of the bias in favor of respondents No.4 to 12 and against the petitioners and M/s. [ENTITY] is further proved from the fact that after respondents No. 1 to 3 were restrained by this Court from finalisation of the tenders in question vide orders passed on 23rd March, 1992, the said respondents with a view to frustrate these orders issued orders dated 27th March, 1992 allotting additional number of bogies in favor of respondents No.4 to 12 on the basis of the tenders awarded for the earlier year atRs.71,900.00 per bogie, with escalation clause but the said offer of allotment for additional bogies was not made to the petitioners and M/s. [ENTITY] plough they had been regular suppliers of the bogies to the Railways for the last so many years. He, therefore, contended that the action of the Railways in fixing the dual price for the bogies of the same specification and further additional allotment of the bogies on the basis of contract for the earlier year in favor of respondents No.4 to 12 was mala fide and liable to be struck down.
(13) Mr. [ENTITY], Senior Advocate, learned counsel for the petitioner in [CASE NUMBER] reiterated the submissions made by the learned counsel for the petitoiner in [CASE NUMBER]. He also contended that the price of Rs.67,000.00 per bogie was a reasonable price. He submitted that M/s. [ENTITY] vide their letter dated 4th February. 1992 addressed to the Railway Board had asked for a negotiation meeting as they wanted to substantially reduce their prices. When Railways failed to fix such a meeting, his client vide letter dated 3rd March, 1992 while extending the validity period by 60 days informed the Railways that the price quoted by them may be read as Rs.69,000.00 instead of Rs.77,666.00 per bogie. The Railways instead of that price gave them counter-offer of Rs.65,000.00per bogie and on 'receipt of this counter-offer the petitioner [ENTITY] by their letter dated 26th March, 1992 informed the Railways that they were willing to supply the bogies at the rate of Rs.67,000.00 per bogie and they will appreciate if the Railways could place an order for the supply of 10.000 bogies. The learned counsel also contended that the petitioner [ENTITY] has also been punished for quoting a reasonable price even in respect of the quantity of bogies allotted to them. According to the learned counsel whereas the Tender Committee on the basis of the established policy had recommended 3062 bogies but by the impugned order dated 18th March, 1992 the Railways had placed the order for supply of 2376 bogies.
(14) Mr. [ENTITY], Additional Solicitor General appearing on behalf of the Railways submitted that since 1983-84 there had been 12 established suppliers of bogies to the Railways including the two petitioners and respondents No.4 to 13. The Railway Board has adopted a system of up-dating the price of the previous contract on the basis of a price variation formula with base date of 1st September to assess the reasonableness of the prices quoted in the tender enquiry. He further stated that the last contract was awarded at a price of Rs.71,900.00 per bogie and applying the price variation formulate the up-dating price as on 1-9-1991 worked out to Rs.79.305.00. He stated that after the tenders were opened on 27th November, 1991 and before the tenders could be finalised, the Government of India announced two major concessions, namely, the reduction of Customs duty on the import of steel scrap and dispensation of the freight equalization fund for steel. All these facts were placed before the Tender Committee which consists of three Members comprising of one Executive Directors each from the Stores, the Mechanical Engineering and the Finance Department. The Tender Committee had two sittings on 28th January, 1992 p:'6 and 3rd February, 1992. The Tender Committee noticed that the abovementioned two petitioners and M/s. [ENTITY] had quoted identical price (Rs.77,666.00 per bogie) and some of the conditions in the quotations were also similar making it a cartel contract. The Tender Committee further stated that the rates of these aforesaid three suppliers were the lowest. Keeping in view the lowest offer of Rs.77,666.00 per bogie received from the abovementioned three established supplies against the up-dated price of Rs.79,305.00 and also keeping in view a reduction in the range of Rs.l500.00 on account of two concessions announced by the Government of India after the receipt of the tenders, the Tender Committee recommended a rate of Rs.76,000.00 per bogie as reasonable price for all the established 12 suppliers including the petitioners and M/s. [ENTITY].
(15) He further submitted that after the recommendations have been made by the Tender Committee on 4th February, 1992 and the file was under consideration, two letters both dated 4th February, 1992 were received from both the petitioners seeking negotiations for reduction of price in view of the concessions announced by the Government of India. He, however, submitted that since while fixing the reasonable price, the Tender Committee had taken into consideration the aforesaid two concessions announced by the Government of India, the Railways decided not to enter into further negotiations with the petitioners. He further submitted that the recommendations of the Tender Committee were considered by the various authorities including the Member Mechanical of the Railway Board. Financial Commissioner, and the Minister of Railways who was the Approving Authority in this matter. He submitted that the Approving Authority came to the conclusion that the petitioners [ENTITY] and [ENTITY] along with M/s. [ENTITY] who are the biggest manufacturers have quoted a cartel price and their intention was to get a larger order on the basis of the quoted price which would eventually nullify the competition from the other manufacturers. In view of this position the Approving authority, directed that the price of Rs.65,000/ - per bogie be counter offered to all the three cartel members and the price of Rs.76,000.00 as recommended by the Tender Committee be offered to the other 9 established suppliers. The Approving Authority further directed change in the quantity of bogies recommended by the Tender Committee. In terms of the orders by the Approving authority, allocation for some of the smaller units like [ENTITY], [ENTITY], [ENTITY] Steel and Bhilai Engineering Corporation were increased. In view of the extra allocations made to the said supplies reduction in allocation was made in respect of the others. The learned Additional Solicitor General submitted that the orders passed by the Approving Authority was bona fide and in the interests of Railways.
(16) Mr. [ENTITY] further submitted that the Railways wanted a large number of manufacturers who can continue to manufacture these bogies in small quantity as at present and the policy of the Railways is to encourage a large number of parties to manufacture the bogies. He contended that the dual pricing was invited by the petitioners themselves who chose to offer a lower rate which was considered unworkable by the Government of India. The Financial Commissioner and the Approving Authority were, therefore, of the view that making offer to obtain short term gain may damage the long term interest of Railways. The learned counsel also contended that as per rules post tender correspondence should stand rejected and the Railways were within their right to reject the letters written by the petitioners [ENTITY] and [ENTITY] after opening of the tenders. He, however, submitted that inspite of the aforesaid legal position, the Railways in fact had taken into consideration the two concessions announced by the Government of India after the tenders were opened while fixing the reasonable price of the bogies.
(17) Another submission made by the learned counsel was that out of respondents 4 to 12, some are sick units and their cases were pending B.I.F.R. and in case price lower than reasonable price is offered to these suppliers, they will vanish from the market.
(18) Mr. [ENTITY]. the learned counsel for respondents 4 to 12 submitted that the offer made by the petitioners vide their letters dated 4th February. 1992 was not bona fide in law. He submitted that before interest not of the contracts, the Railways were required to ascertain as to what is the proper price for a railway bogie. He stated that after applying a scientific formula. the Railways came to the conclusion that the proper price for this contract was Rs.76,000.00 per bogie. He, therefore, contended that the reduced offer of Rs.67,000.00 per bogie submitted by the petitioners after the recommendations have been made by the Tender Committee was not bona fide. He further contended that the offer made by the petitioners is post tender offer and cannot be taken congnizance of.
(19) Another contention raised by the learned counsel was that assuming such an offer can be taken into consideration, the same is predatory and the Government was justified in overlooking the offer. He also submitted that the price of Rs.67,000.00 quoted by the petitioners was with a motive to create a monopoly which price has not been explained by the two petitioners as a reasonable price. Elaborating predatory practice the learned counsel submitted that the purpose of the predatory business is to advance the actor's competitive position, not by improving the actor's market performance, but by threatening to injure or injuring actual or potential competitors, so as to drive or keep them out of the market, or force them to compete less effectively. He submitted that in the present case the reduced offer of Rs.67,000.00 per bogie by the petitioners' himself predatory practice and was, therefore, liable to be rejected by the Railways.
(20) He lastly contended that the Government was justified to reject the offers of the petitioners in view of the fact that one of the petitioners, namely, [ENTITY] had in the past exploited monopoly which is the part of record. The learned counsel, however, admitted that there was no justification for the Railways to fix two different prices for the supply of railway bogies of the same specifications manufactured by different manufacturers. He also stated that the fact that some of the units are sick is of no relevance for fixing the price.
(21) As regards allocation of bogies, the learned counsel submitted that there has not been any consistent policy of the Railways on this aspect of the matter. He submitted that the allocation in the earlier year shows that the Railways has not been taking into consideration the assessed capacity while making allocation to various suppliers.
(22) Mr. [ENTITY], Senior Advocate, the learned counsel appearing for respondent No. 13 M/s. [ENTITY] submitted that nominally the lowest possible rates have to be accepted unless there is any doubt about the genuineness of the tenderers. He submitted that M/s [ENTITY] had not addressed only communication to the Railways to reduce their price after the opening of tenders, still in their case the counter-offer was given at the rate of Rs.65,000.00 per bogie whereas in respect of respondents No.4 to 12 the counter-offer was given at Rs.76,000.00 per bogie. Thus, there was no justification in reducing the price to Rs.65,000.00 so far as M/s. [ENTITY] was concerned. He further submitted that respondents No. 1 to 3 have failed to give any justification as to why the offer ofRs.67,000.00 per bogie given by the petitioners was further reduced to Rs.65.000.00 by the Railways. He, however, agreed with the submissions made on behalf of the petitioners that in the present case the workable price per bogie was Rs.67,000.00. He also submitted that in case the court fixes the price as Rs.67,000.00per bogie, his client shall be willing to supply the bogies at this price. Regarding allocation the learned counsel submitted that the Tender Committee was a High Power and Expert Committee and the recommendations made by such a Committee could be varied only if there are good reasons to do so. In support of his contentions he placed reliance on a Supreme Court judgment in [ENTITY] vs. State of UP., .
(23) Before dealing with the arguments advanced by the counsel on both sides, it will be necessary to examine the discretionary powers of the public p:'6 authorities. In this connection we may refer to a few paragraphs from [ENTITY]: Administrative Law (6th Edn.) which were cited with approval by the Supreme Court in a recent judgment in [ENTITY] (Supra). " THEwhole conception of unfettered discretion is in appropriate to a public authority, which possesses powers sole in order that it may use them for the public good.
(24) There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed. Nor is this principle an oddity of Birth or American law: it is equally prominent in French law. Nor is it a special restriction which fetters only local authorities: it applies no less to ministers of the Crown. Nor is it confined to the sphere of administratoin: it operates wherever discretion to order jury trial. It is only where powers are given for the personal benefit off the person empowered that the discretion is absolute. Plainly this can have no application in public law.
(25) For the same reasons there should in principle be no such thing as unreviewable administrative discretion, which should be just as much a contradiction in terms as unfettered discretion. The question which has to be asked is what is the scope of judicial review, and in a few special cases the scope for the review of discretionary decisions may be minimal. It remains axiomatic that all discretion is capable of abuse, and that legal limits to every power are to be found somewhere." In para 27 of the same judgment the Supreme Court observed',- "EVERY holder of a public office by virtue of which he acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such. all powers so vested in him are meant to be exercised for public good and promoting the public interest. This is equally true of all actions even in the field of contract. Thus, every holder of a public office is a trustee whose highest duty is to the people of the country and, therefore, every act of the holder of a public office, irrespective of the label classifying that act, is in discharge of public duty meant ultimately for public good. With the diversification of State activity in a Welfare State requiring the State to discharge its wide ranging functions even through its several instrumentalities. which requires entering into contracts also, it would be unreal and not pragmatic apart from being unjustified to exclude contractual matters from the sphere of State actions required to be non-arbitrary and justified on the touchstone of [SECTION]."
(26) Relying on the ratio in the two earlier judgments of the Supreme Court in [PRECEDENT], and Kasturi Lal Lakshmi [ENTITY] vs State of Jammu and Kashmir, , it was further observed by the Supreme Court, "it can no longer be doubted at this point of time that [SECTION] of the [ACT] applies also to matters of governmental policy and if the policy or any action of the government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional".
(27) Keeping in view the law laid down by the Supreme Court as stated above, we now proceed to deal with the discretionary powers exercised by the Approving Authority (Minister of Railways) in fixing two different prices for railway bogies of the same specifications manufactured by different manufacturers which according to the petitioners is likely to cause to the Government of India a loss of approximately 20 crores.
(28) The Railways in para 4 of their affidavit filed on 1st April, 1992 has stated that "the last contract was awarded at a price of Rs.71,900.00 per- bogie and applying the price variation formula, the updated price as on 1-9-1991 worked out to Rs.79,305.00."
(29) We have perused the original record and we find that the amount of Rs.79.305.00 was worked out by the Tender Committee of the Railways on 4th February. 1992 on the basis of index figures as on 1-9-1991 and the formula calculating the same is as follows: Pi Po Ii Li = (10+40 x + 50 x ) 100 Io Lo (30) Where Po & P1 are the bogie prices with Base Date September 1990 and September 1991. Io & Ii are indices for Iron and Steel and to & Li are the consumer price indices for the corresponding period.
(31) It is the admitted case of the parties that at time of the submission of the tenders the latest p:'6 index figures which were available were as on 1-7- 1991. Applying the same formula mentioned hereinabove, the up-dated price as on 1-7-1991 has been worked out by the petitioner [ENTITY] at page 651 of the paper book and it comes to Rs.77,666.00. Thus it was this price which was quoted by the petitioners and respondent No. 13 and which according to Railways own formula was reasonable price.
(32) Thus it will be seen that whereas the petitioners and respondent No. 13 had quoted a price which was calculated in accordance with the formula adopted by the Railways but respondent Nos.4 to 12.(to whom the Railways have counter offered Rs. 11,000.00 per bogie more than what was offered to the petitioners) had quoted between Rs.5000.00 to Rs.7000.00 per bogie more than the updated price as on 1.7.1991. Is it possible for the Railways to justify their contention that the petitioners and respondent No.13 ([ENTITY]) had formed the cartel simply because they had quoted identical prices in their respective tenders which in fact as explained hereinabove was based on a formula adopted by the Railways themselves? The answer has to be in the negative.
(33) Again the Railways in their counter affidavit filed on 1.4.1992 have admitted that after the tender was opened and before it could be finalised, the Government of India announced two major concessions, namely, the reduction of Customs duty on the import of steel scrap and dispensation of the freight equalisation on the fund for steel. Keeping in view this development, the petitioners vide their letters dated 4th February, 1992 approached the Railways for negotiations as they wanted to substantially reduce the offer. Again while extending the validity of their offer, the petitioner [ENTITY] offered the reduced price at Rs.68,000.00 per bogie and further a discount of RS.1000.00 per bogie, if the order was more than 5000 numbers. Almost a similar offer was made by the petitioner [ENTITY]. According to the petitioner [ENTITY] besides two concessions announced by the Government, the liberalized policy of the Government further resulted in greater economy and it was in these circumstances that they had reduced their price substantially. However, the case of the Railways is that in terms of the concessions announced by the Government of India, the reduction could be to the tune of Rs. 1600.00per bogie and that had been taken into consideration while fixing the price at Rs.76.000.00 per bogie. The original records show that the recommendations of the Tender Committee and other functionaries including the Financial Commissioner were put up before the Approving authority on 15th February, 1992 and the Approving authority for the first time passed the orders on 14th March, 1992. In between the letters dated 4th February, 1992 and 27th February. 1992 were received by the Railways. We fail to p:'6 understand as to why the Railway authorities could not initiate negotiations with the petitioners when they had offered to reduce their offer to such an extent which could result in saving crores of rupees by the Railways.
(34) Here we would like to refer to Annexure-C to the supplementary affidavit filed by the Railways on 21st July, 1992. This annexure indicates that such negotiations were held while finalising the tenders for the period 1990-91. This annexure further shows that right from 1984 till 1991-92 the contractual price ha.'. been fixed on the basis of the lowest quotation given by any one of the 12 suppliers though the up-dated price in many of the years has been on the higher side. For instance for the period 1986-87 the up-dated price was Rs.60,397.00 per bogie but the contractual price was Rs.47,997.00 per bogie. Similarly for the period 1988-89 the up-dated price was Rs.56,297.00 per bogie and the contractual price was Rs.52,500.00 per bogie and for the year 1991-92 whereas the up-dated price was Rs.73,300.00per bogie, the contractual price was Rs.71,900.00 per bogie. This annexure also dismantles the contention of the Railways that since the price quoted by the petitioners and respondent No. 13 was identical (Rs.77.666.00 per bogie) these suppliers had formed the cartel. In fact it will seen from this Annexure that in the year 1991-92 the price offered by 11 suppliers was identical i.e. Rs.73,350.00. Similarly during the year 1990-91 the price offered for 2nd category of bogies by 10 suppliers was identical. During the year 1988-89 the price offered by 3 suppliers, namely, [ENTITY], [ENTITY] and [ENTITY] was identical. During the year 1986-87 the price offered for Od wagons by 10 suppliers was identical and for the year 1984-85 the price offered by 2 suppliers was identical but in all these previous years no cartel was alleged by the Railways and the counter-offer given by the Railways used to be on the basis of the minimum price offered by any one of these 12 suppliers.
(35) In view of the facts stated hereinabove we find no force in the stand of the Railways that the petitioners and respondent No. 13 had formed a cartel. Rather the stand is based on extraneous considerations.
(36) From the original record we find that the only ground given by the Railways for offering RS.11000.00 less to the petitioners and respondent No.13 is that they had formed a cartel. In this connection we would like to reproduce the following from the decision of the Approving authority taken on 14th March, 1992. "[ENTITY],[ENTITY] and [ENTITY] have formed a cartel. I find that subsequent to F.C.'s note, besides [ENTITY], [ENTITY] has also offered to reduce the price by 10% or more vide their letter of 19.2.1992, if they are called for negotiations. Under the circumstances, all the three of them may be offered a price lower by Rs.11,000.00 with reference to the counter-offer recommended by the Tender Committee and the quantities also suitably adjusted so that the cartel is broken. The quantities ordered on [ENTITY], [ENTITY] and [ENTITY] may be 1795, 2376 and 2500 respectively."
(37) This clearly shows that the petitioners and respondent No.13 have been treated with bias both in fixing the price offered to them and also in the quantity of bogies allocated to them. Since we have come to the conclusion that the petitioners and respondent No.13 had not formed any cartel, we are of the view that the decision of the Approving Authority reproduced hereinabove is arbitrary, without any valid reasons and has to be struck by this court.
(38) Now we proceed to examine as to whether the action of respondents 1 to 3 in fixing two different prices for bogies of the same specification satisfies the test of reasonableness. As held by the Supreme Court in Smt. [PRECEDENT] (supra) every holder of a public office by virtue of which he acts on behalf of the State is ultimately accountable to the people in whom the sovereignty vests and as such all powers so vested in him are meant to be exercised for public good and promoting the public interest even in the field of contract. The point which is to be examined is as to whether the discretionary power exercised by the Approving Authority in offering Rs. 11,000.00per bogie more to respondents 4 to 12 was for public good and promoting the public interest As is evident from the decision dated 14th March, 1992 taken by the Approving Authority, the petitioners and M/s. [ENTITY] were offered Rs.65,000.00 per bogie (though the petitioners had offered Rs.67,000.00 per bogie and M/s. [ENTITY] had offered Rs.77,666/ per bogie) whereas respondents 4 to 12 were offered Rs.76,000.00 per bogie, which was on the ground that the petitioners and M/s. [ENTITY] had formed a cartel simply because they had given an identical offer of Rs.77,666.00 per bogie which was a reasonable offer as explained hereinabove. In the same decision, the reason for offering Rs.76,000.00 per bogie to respondents 4 to 12 was that the price of Rs.76.000/ per bogie was a reasonable price as recommended by the Tender Committee for all the suppliers. We fail to understand as to why the Approving Authority did not think it proper even to offer the same minimum price offered to the petitioners and M/s. [ENTITY], to respondents 4 to 12 also to ascertain their re-action as to whether they were agreeable to that offer or not, particularly when it was clear that by counter-offering this. Railways could have saved a sum of about Rs.20 crores. In this connection it will be relevant to reproduce a note from the Chairman, Railway Board, who happened to be Member Mechanical also, which was recorded by him after the Approving Authority had taken a decision to offer two different prices as stated hereinabove. "Action will be taken as desired by M.R. From what has been stated, we are to apply two prices - one to three companies and somewhat higher price to the others. M.R. may consideration whether we may again offer the lower price to all the companies as we will thus be saving much more."
(39) The abovementioned note dated 16th March, 1992 was put up before the Approving Authority through the Financial Commissioner on 16th March, 1992 and the suggestion made by (he Chairman, Railway Board was rejected by the Approving Authority without any valid reason. The main reason given by the Approving Authority while rejecting the note of the Chairman, Railway Board was M/s. [PRECEDENT]. that the Railways has become a centre for patronising vested interests. It is not understood as to how any vested interest could be patronized by offering the same lower price to respondents 4 to 12 which has been offered to the petitioners and M/s. [ENTITY]. As stated hereinabove the Railways had been offering the minimum price to all the 12 suppliers in all the earlier years. From these facts we are of the opinion that the action of the Railways in offering Rs.11,000/ per bogie more to respondents 4 to 12 was neither for public good and promoting public interest, nor it satisfies the test of reasonableness.
(40) We also find that the contention urged by the alleged four sole tenderers that in case higher price of Rs.76,000.00 per bogie had not been offered to respondents 4 to 12 (some of which have become sick units) they would have vanished from the market, is misconceived. As stated earlier the said respondents along with both the petitioners and respondent No. 13 have been supplying bogies to the Railways at a uniform price for the last so many years and it is not the case of any of the suppliers that it has not been making profit out of those supplies. Even the learned counsel for respondents 4 to 12 admitted that these respondents had been making reasonable profit during all these years. In any case the Government has justification to offer a higher price than the market price to any supplier to rehabilitate it. It may be relevant to point out that five out of respondents 4 to-12. namely, [ENTITY], [ENTITY], [ENTITY], [ENTITY] and [ENTITY] had even offered to supply the entire quantity of 19000 bogies in their respective tenders like the petitioners and M/s [ENTITY].
(41) In view of the above discussion both the writ petitions are allowed and the impugned counter-offers continued in communication dated 18th March, 1992 addressed to the petitioners and M/s. [ENTITY] as well as communication of the same date addressed to respondents 4 to 12 are hereby quashed. We. further, hold that the price of Rs.67,000.00 per bogie offered by the petitioners (which was also agreed upon in court on behalf of respondent No. 13 during the course of arguments) is a reasonable price and we direct that the Railways will not pay the price higher than Rs.67,000.00 per bogie to any of the suppliers. Since we have held Rs.67,000/ per bogie to be a contractual price, we direct the Railways to encash the bank guarantee/bank guarantees forthwith in case the Railways has paid any amount in account to any of the suppliers on furnishing bank guarantee in terms of the orders of the Supreme Court.
(42) Regarding allocation of bogies, the Approving Authority has made alteration in the recommendation of the tender committee by making deduction of 20% in the allocation to the petitioners on account of cartel whereas to M/s Bhartia allocation was also decreased. Since we have not agreed with the plea of cartel. the allocation made by the Approving Authority also cannot stand and is hereby quashed. However, it will be open to the Approving Authority to make fresh allocation keeping in view the past practice or on any reasonable basis and until that is done, the allocation suggested by the tender committee would hold good for getting supplies from the 12 manufacturers.
(43) However, in the circumstances of the case we leave the parties to bear their own costs.