*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY + Writ Petition Nos.8674, 8673 & 8585 of 2010 (COMMON ORDER) %26-04-2011 # Ad Age Outdoor Advertising Pvt. Ltd. & others ..petitioners And $ The Greater Hyderabad Municipal Corporation ..Respondents !Counsel for the petitioners : Ms. Anjana Taggarse-Motupalli ^Counsel for respondents : Dr.Y. Padmavathi, S.C for GHMC Sri K.V. Bhanu Prasad, for R4 to R6 < Gist: > Head Note: Citations: 1) AIR 2004 SC 4942 2) AIR 1979 SC 1628 3) AIR 1980 SC 1992 (1) 4) 2010 (3) ALD 505 (DB) 5) AIR 2009 SC 2519 6) 2003 (6) ALD 99 (SC) THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition Nos.8674, 8673 & 8585 of 2010 COMMON ORDER: In these three writ petitions, identical relief, namely, to declare the action of the Greater Hyderabad Municipal Corporation, the 1st respondent herein, (for short ‘the Corporation’) in awarding of different categories of contracts by treating them as pilot projects, in favour of respondents 4 to 6, by way of nomination, vide proceedings dated 09-06- 2009, 25-01-2009 (3rd respondent), 02-09-2009 (4th respondent), and 13-05-2009 and 14-05-2009 (5th & 6th respondent) and all consequential proceedings; as illegal, arbitrary, contrary to the provisions of the Hyderabad Municipal Corporation Act (for short ‘the Act’), and violative of Article 14 of the Constitution of India. Consequential directions are also prayed for, to compel the Corporation to issue auction notifications for awarding the said works. 2. The petitioners are advertising agencies, as are respondents 4 to 6. Their principal activity appears to be in the city of Hyderabad. In the affidavits filed in support of the respective writ petitions, they have furnished the details of the activities undertaken by them. The Corporation evolved a scheme of ‘Fund Your City’, under which various installations, such as traffic signals, were to be provided for, by private agencies, with their funds, under the ‘build operate and transfer’ (BOT) scheme. For award of contracts under that scheme, tenders are invited and public auction is conducted. 3. The petitioners contend that after the expiry of the term of the elected body of the Corporation, the Government appointed a Special Officer, the 2nd respondent herein, in exercise of power under Section 7(4) of the Act, and taking advantage of his position, the 2nd respondent has awarded contracts of very high magnitude and importance, in favour of respondents 4 to 6, according to his whims and fancies. 4. The petitioners contend that though there is nothing novel about installation of traffic signals and surveillance cameras, sign boards, dust bins, etc., they were treated as ‘Pilot Projects’ and were given on nomination, without inviting tenders or bids. They also plead that Section 124 of the Act mandates that any contract of the value exceeding Rs.20 lakhs must be awarded by inviting bids and tenders, and the mandatory requirement was not followed by the Corporation. 5. A counter-affidavit is filed on behalf of respondents 1 and 2. The fact that the works of different categories were awarded to the respondents 4 to 6, on nomination basis; is not disputed. It is however stated that, in view of the insistence by the Additional Commissioner of Police (Traffic), that installation of high quality traffic signals, at some important junctions is immediately needed, the works were awarded on nomination basis, duly verifying the experience and capacity of the respondents 4 to 6. It is pleaded that the pilot projects were taken up at certain identified locations, and if the said projects prove to be successful, identical works at other places would be allotted by inviting tenders and by conducting auction. According to the respondents 1 and 2, such practice was upheld by this Court, as well as the Supreme Court. 6. Respondents 4 to 6 have also filed counter-affidavits, opposing the writ petitions. They have narrated the circumstances under which, the contracts came to be awarded to them. They raised objection, as to the maintainability of the writ petitions. It is also pleaded that they have acquired expertise in certain specified categories of works, and on being satisfied about the viability of the projects, the contracts were awarded to them. It is also their case that huge investment is involved for installation of the electrical and mechanical devices, and in many cases, their returns are yet to start. 7. Ms. Anjana Taggarse-Motupalli, learned counsel for the petitioners submits that the concept of the Corporation awarding works of installation of traffic signals or construction of foot over bridges under BOT scheme is not something new, and it was introduced long back, under the Fund Your City Scheme. She contends that the petitioners have acquired expertise not only in installation and display of hoardings of various categories, but also in the types of works, that were allotted to respondents 4 to 6. She contends that the 2nd respondent has exceeded his powers and violated the specific provisions of the Act and the Rules made thereunder, in the matter of award of contracts. According to the learned counsel, the award of contracts would certainly result in distribution of State largesse, and the same is required to be done in a transparent and fair manner, and that conducting of auction or inviting tenders is the only mechanism through which, it could have been ensured. She contends that, time and again this Court and the Supreme Court frowned upon the award of contracts of such a nature, on nomination basis. She relied upon certain decided cases. 8. Dr. Y. Padmavathi, learned Standing Counsel for the Corporation submits that the very award of contracts impugned in the writ petitions was upheld by this Court in W.P.No.11354 of 2009. She contends that the Corporation would, almost as a matter of policy award contracts by inviting tenders, but, in the instant case, they had to be awarded on nomination basis, since the works were taken up, as pilot projects. She places reliance upon the judgment of the Supreme Court in 5 M and T Consultants, Secunderabad, v. S.Y. Nawab and another[1] and other precedents. 9. Sri K.V. Bhanu Prasad, learned counsel for the respondents 4 to 6 submits that his clients have approached the Corporation with a request to permit them to undertake the works of different categories, which the Corporation was interested to take up as pilot projects, and that on being satisfied about their expertise, the works were allotted on nomination basis. He contends that what was awarded to his clients is only a miniscule quantity of works, compared to the potential, that exists in the city, for such works. He states that huge expenditure was incurred by his clients for installation of equipment of very high precision and operation thereof, and that the Corporation cannot be said to have suffered any loss. He submits that, in case the Corporation is satisfied with the functioning of the installations made by respondents 4 to 6, auction would be conducted for other locations, and the petitioners can certainly participate in it. He has adopted the arguments advanced on behalf of the Corporation. 10. After the writ petitions were reserved for judgment, the learned Standing Counsel for the Corporation, brought to the notice of this Court, that the contract awarded to respondent No.4 was terminated by the Corporation, through proceedings dated 02-04-2011. 11. There is no denial of the fact that the respondents 4 to 6 were awarded the contract of installation of various devices, such as traffic signals, surveillance cameras, gantries at certain important locations in the city of Hyderabad, without inviting tenders. The justification pleaded by the Corporation is that, the allotment was made on experimental basis and as pilot projects, and depending on the experience or satisfaction about the working of those projects, the installation in vast number of other locations in the city would be undertaken, by conducting public auction. 12. The genesis for allotment of the works, on nomination basis, is said to be a letter, written by the Additional Commissioner of Police (Traffic), to the Corporation, requesting installation of traffic signals of improved variety at eight junctions, and the applications said to have been submitted by the three agencies, i.e. respondents 4 to 6. On legal side, the Corporation tries to justify this exercise, by placing reliance upon the judgment of the Supreme Court, and an order passed by this Court in W.P.No.8674 of 2010 and batch. 13. It hardly needs any emphasis that, in the ordinary course of the things, entrustment of the works, that were awarded or allotted to the respondents 4 to 6; would be, through auction or by inviting tenders. The very fact that the petitioners offered to pay certain amount, in return, to the Corporation, if they are permitted to make the same installations, with similar conditions and facilities, would disclose that the installations would be sources of income to the Corporation. The terms of the contract entered into with the respondents 4 to 6 are such that, the Corporation would not derive any income, and that the respondents 4 to 6 would be entitled to advertise through the said installations, and appropriate the income for a period of eight years. It appears that the Corporation was convinced that the income derived from the installations, would be sufficient to meet the expenditure, maintenance and to provide marginal profits for respondents 4 to 6. 14. Through a catena of judgments, the Hon’ble Supreme Court held that distribution of any largesse of the State shall be only through the process of conducting of auction, or by inviting tenders. Award of contracts through nomination basis can be permitted only in exceptional cases, such as to meet the immediate necessity, caused due to natural calamities, or where persistent efforts made for conducting auction did not yield any results, and the public interest is made to suffer, in the meanwhile. 15. Reference can be made to the judgment of the Supreme Court i n Ramana Dayaram Shetty v. The International Airport Authority of India[2]. It was held that in the matter of distribution of largesse, the State shall act in a transparent, fair and reasonable manner and any arbitrariness, in such matters would be antithesis to equality, guaranteed under Article 14 of the Constitution of India. To the same effect is the judgment of the Supreme Court in M/s.Kasturi Lal Lakshmi Reddy v. the State of Jammu and Kashmir[3]. 16. The authorities can be multiplied on this aspect. However, what the Court would verify is the decision making process, and not the decision itself. 17. Recently a Division Bench of this Court, in P. Narayana Reddy and others v. Government of Andhra Pradesh and others[4], discussed the law on the subject, by referring to the various judgments rendered by the Constitutional Courts. In paragraph 16 of the judgment, the discussion was summed up, as under: “Para-16: In rare and exceptional cases, having regard to the nature of the largesse or for some other good reason, a contract may be granted by private negotiations, but normally that should not be done as it shakes public confidence (Ram and Shyam Co. v. State of Haryana (1985) 3 SCC 267); Nagar Nigam, Meerut v. Al. Fahem Meat Exports Pvt. Ltd., (2007 (1) Supreme 704). There may be cases where, in the special facts and circumstances and due to compelling reasons which must stand the test of Article 14 of the Constitution, departure from this rule can be made (Kasturi Lal Lakshmi Reddy v State of J & K (1980 (4) SCC 1). Instances of such rare and exceptional cases are: during natural calamities and emergencies declared by the Government; where there is a single source only; where the contractor has exclusive rights in respect of the goods or services and no reasonable alternative or substitute exists; where the auction was held on several dates but there were no bidders or the bids offered were too low, etc. The normal rule of awarding contracts by public tender may, in the aforesaid instances, be departed from and such contracts may be awarded through ‘private negotiations’.” 18. In that case, the work of diversion of State Highway valued at Rs.120 crores was entrusted on nomination basis. The basis pleaded was that, the same agency was entrusted with the work of an irrigation project, and that there is an urgency in the context of rehabilitation of the villages, that were to be submerged in the project. This Court flatly negatived the contention, holding that there did not exist any basis. The various events, that preceded for award of contract, were taken note of, and it was held, “Para-38: …The plea of urgency necessitating award of contract on nomination basis does not, therefore, merit acceptance. The facts and circumstances of the case, when taken as a whole, do not logically warrant the 1st respondent’s conclusion that the urgency to lay the diversion road was such as to necessitate deviating from the norm of awarding contracts through the tender process and instead have the work allotted on nomination basis. As the overwhelming weight of facts reveal that the tender process was avoided not because of urgency in having the road laid, there is no justification for avoiding the transparent tender process”. 19. In the case on hand, neither any urgency is pleaded nor there exist any factors warranting deviation from the known procedure. It is not as if the necessity to improve the signals in the road junctions of Hyderabad has arisen overnight. Further, the respondents 4 to 6 are not the only agencies, which had the technology or wherewithal to install the equipment. The Corporation does not deny that it has already launched a project of “Fund Your City”, under which, the agencies, installing various devices in the city, were selected by inviting tenders, and that the Corporation was getting income without making any investment. The relevant paragraph of the counter-affidavit reads: “the GHMC has introduced conduct of Open-Bid-Cum-Auction under “Fund Your City” programme under Public Private Partnership mode to improve the infrastructural facilities in twin cities in the year 2005 to a lot space for display of advertisements on various Municipal properties and conducted 15 auctions so far under this programme”. 20. The letter addressed by the Additional Commissioner of Police (Traffic) cannot be taken as the basis to deviate from the recognized policy for allotment of public contracts, or distribution of public largesse. Further, the letter does make reference to any particular variety of improved systems. The letter does nothing more than recommend the cases of the agencies that approached the ACP. It reads, “Government of Andhra Pradesh Police Department Office of the Addl. Commissioner of Police. No.Tr.T1/842/2008. To The Addl. Commissioner, Advertisements, GHMC, Hyderabad. Madam, Sub: Proposal for erecting Barricadeson Dividers and traffic signages – Reg. Ref: No.SD/GC/009-08, dt.11/2/2008, of M/s Sign ‘N’ Design. -o0o- Vide the letter under reference, M/s Sign ‘N’ Design have submitted a proposal for providing barricades on dividers and traffic signages wherever required in the twin cities of Hyderabad and Secunderabad. The dividers at most places are very low and pedestrians and vehicles are crossing roads at random and causing accidents. Traffic signages advising people to choose their lanes in advance and to avoid traffic congestion and confusion at the junctions are proposed by M/s Sign ‘N’ design, besides barricades on dividers. Their proposal may be examined for further action as deemed fit. The concept, per se, could be useful from the point of view of traffic awareness & regulation. Yours faithfully, Addl. Commissioner of Police, Traffic, Hyderabad.” 21. It may be rather incidental that the decision was taken at a time, when the Corporation did not have the elected representatives. However, the sequence of events would disclose that the Special Officer, who was virtually conferred with the power of the elected body, has taken the freedom of deviating from the settled norms. 22. It is not uncommon that the authorities of the Police Department would emphasize the need to improve the systems, and make request to the Corporation, in this regard. As a responsible civic body, the Corporation is under obligation to provide the traffic signal system, etc., which would meet the needs. If it becomes necessary, technology has to be imported. In case the Corporation does not have adequate funds, it could have invited the bids under the prevailing scheme of “Fund Your City”, duly mentioning the specifications, in consultation with the traffic police or the experts in the field. The letter addressed by the ACP (Traffic) does not emphasize on any improved or unique systems. It is a letter of recommendation, pure and simple. 23. After receiving the letter from the City Police, and the applications from the respondents 4 to 6, the 2nd respondent convened the meeting with the following officials, on 27-04-2009: “1. Sri S. Subba Rao, IRS, AC (T & T), GHMC 2. Sri Dhan Singh, Chief Engineer, GHMC 3. Smt. P. Anuradha, AC (Adv), GHC 4. Sri Ravi Chandra, Dy. Commissioner of Police (Traffic)”. 24. The minutes of the meeting are as under: (a) Since the proposal has been forwarded by the City Traffic Police, it has been decided to take it up on pilot basis to begin with. After assessing the functionality of these signages, a decision will be taken to take it up on a large scale to cover in the entire city through Fund Your City route. (b) The Pilot phase should cover 8 to 10 important places and AC (Adv) was authorized to finalise it and issue work order to the company based on stipulated certification from Engineering wing. (c) During the presentation, M/s. Sign & Design representatives have given the costing of the each signage and pay back period which is between 7 to 8 years. Based on that it was agreed that the concession period for this pilot phase shall be restricted to 8 years. (d) It was also decided that GHMC will commission a detailed study to bring out the requirements of modern signages for the convenience of the commuters in the City. Based on that study, the requirements will be finalized and then would be put to auction under Fund Your City Programme by clubbing different types of signages in convenient packages”. 25. Based on this, the 2nd respondent issued proceedings dated 13-05-2009, in favour of the 6th respondent, curiously, awarding contract for installation of 6 signages at six locations, as under: Sl. No. Exact Location / Spot where Traffic Signage is permitted to be installed after requisite Technical Clearance Direction of the road Width of the road No. of Traffic Signages to b e Installed by M/s Sign & Design Preferred L o c a t i o n for installation of Traffic signages 1 Abids, GPO GPO to Basheerbagh 80 ft Only one (1) 100 feet from junction 2 Liberty X Roads Basheerbagh to Liberty 100 ft Only one (1) 100 feet away from junction 3 RTC X Roads RTC X Roads to Chikkadpally 80 ft Only one (1) 100 feet from junction 4 Lepakshi Junction Basheerbagh to Nizam College road 100 ft Only one (1) 100 feet from Jagjeevan Ram Statue 5 Road No. 1 & 12, Banjara Hills Junction Masab Tank to Road No. 1 & 12, Banjara Hills 80 ft Only one (1) 100 feet from Junction towards Masab Tank 6. Paradise X Roads CTO Junction to Paradise Circle 60 ft Only one (1) 100 feet from Junction towards CTO 26. The 6th respondent made a representation on the next day, with a request to increase the number of proposed installations. Without even placing the matter before the Committee, which decided the matter, the 2nd respondent permitted installation of about 20 more signages. The arbitrariness, if not favouritism, exhibited by the then Commissioner and Special Officer was evident from these proceedings. Even from the minutes of the meeting of the Committee, it was clear that the scheme of Fund Your City was very much prevalent. It was not even mentioned that there was any urgency to bypass that scheme, and awarding the contracts through nomination. The award of contracts to respondents 3 to 5 was on similar lines. The action of the Corporation is arbitrary and violative of Article 14 of the Constitution of India. 27. One of the grounds pleaded by the Corporation for awarding the works on nomination basis is that, the works were taken under a “pilot project” and that the objective is to observe the performance of the installations. In this regard, it must be noted that whenever an agency intends to install large number of new or improved devices, initially it takes up what is known as “Pilot Project”. The purport thereof is that as a measure of sample of experiment, a small fraction of an otherwise large work is taken up, to satisfy itself that the installation or launching of the project in its entirety would be troublefree. The meaning of the word “pilot” is furnished in the New Lexicon Webster’s Dictionary as under: 1. (n) a person qualified to direct a vessel on its course into or out of a port, river mouth, canal etc. or along a coast, and taking over navigational control from the master of the vessel while so employed a person qualified to operate the flying controls of an aircraft someone who acts as a guide a machine part which guides another part in its movement a pilot light. 2. (adj.) serving as an experimental model for others to follow, a pilot factory plant; serving as a device to direct the operation of a larger device; serving as a guide. (v.) to act as the pilot of (a ship, aircraft etc.); to guide (someone).” 28. The adjective form of the word becomes relevant in the present context. The expression “pilot engine” is explained as “a locomotive sent ahead of a train to see if the track is clear”. Similarly, the word “pilot light” means “a small burner kept alight, to kindle a large burner when the fuel is supplied”. The examples can be multiplied. 29. Broadly, the characteristics of a pilot project are: (a) the agency that launches it, has a definite plan to install quite large number of devices with a definite specification; (b) at the threshold, the agency launches a portion of the project or prototype of the devices, on experimental basis; (c) once the shortcomings or defects in the functioning of pilot project are noticed, and rectified, or the economics are worked out, the required number of devices are launched, or installed. 30. In the instant case, hardly did the Corporation have any idea as to the nature of devices to be installed. It did not stipulate as to the nature and specifications of the installations or the number thereof, much less, the cost structure thereof. It has already been mentioned in the preceding paragraph that the basis for according permission to respondents 3 to 6 for installation of the devices was letters addressed by them and a recommendation from the Assistant Commissioner of Police (Traffic). In the absence of a clear plan or idea, as to the functions, specifications, or other details of the concerned installations, it would be a misnomer to call the exercise undertaken by the Corporation as “pilot project”. 31. In Ravi Development v. Shree Krishna Prathisthan[5], the Supreme Court dealt with the manner in which the works that are taken up on pilot basis. It was held that even in such cases, the concept must be duly publicized and the interested agencies must be given an opportunity. The relevant portion reads: “Lastly, we conclude that the impugned pilot project or initiation taken by the Government of Maharashtra along with MHADA to encourage public-private participation is in accordance with the need of the time as well as a laudable effort. But to make it an effective approach Swiss Challenge Method or any other encouraging concept should be duly publicized first. The effort of public-private participation can only be possible when private entities are aware of such