MNBSHE Iil©aCOURTOFJUDIGATUREATBILASPUR (CHHATISGARHI W. P. N0. ^Sb-f-0F 2004 PETITIONERS ^ .^ ^ ^y^" RESPONDENTS ~s< 1. Mohammed Rafi, S/o Late Shri Abdul Haliz, aged about 46 years, Occupation - Transporter, R/o Surajpur, Dist. Surguja [Chhattisgarh] 2. Lalan Singh, S/o Late Shri Ram DularSingh,aged aboyt 59 years, Occupation- Transporter, R/o Old Bus Stand Surajpur, District Surguja [Chhattisgarh] VERSUS CONSTrTUTION OF IMMj^i iE'QR ISSlIANCa OF WRI'I'! IN NATURE OEi CERTt^iy^Sti iBiIAiKMUM'GiS i BR@HI^itt©N AND OTHEKSUNABBffi'H^i C»IWRH«.DIREeTl®NlOR DIRECTIONS,ORD]E»6Rsi@iilDERS: 1 1. State of Chatisgarh through Secretary, Department of Food & Civil Supplies, Mantralaya,D.K. S. Bhawan, Raipur [Chhattisgarh] 2. Chhattisgarh State Civil Corporation Limited, Raipur Through its Managing | Director, .Bal Ashrain Parisar, Kacheri ChQwk, Raipur [Chhattisgarh] 3. Collector, District Surguja [Chhattisgarh] 4. District Manager,CGState Civil Supplies Corporation Ltd., Ambikapyr, Distri(!t Surguja [ChhattiSgary] 5. Shafl Ahmed, Transport CQntractor, R/o Mominpura Ambikapur, District Surguja [Chhattisgarh] WRFT PETITION UNDERj ARTIGLE 226 OF THE -a a i.-iuyi.td...., .„. „„....„. HI6H COURT OF JUDICATURE AT BILASPUR (CHHATTTS6ARH Sopal Agarwa! Versus- - Stats of Chhattisgarh and others Mohansmed Rafi & another - Versus- State of Chhattisgarh and others 507- L.C. Bhadoo Judge ^/-h-2.2005 Aw*. \9 .2-%>' M~~^'rS' IJ.^ HI6H COURT OF JUDICATURE AT BIL^SPUR (CHHATTIS6A! 6opal A9arwai - Versus - State of Chhattisgcrh cnd others AND i^i Mohammed Rafi S, another Versus - Stote of C'nhattisgarh and others Present;- Shri Manindra Shriyastava, Sr. Advocate with Smt. SmitaShai, Advocate: Shri Amit Sharma, Advocate; Shri N. K. Agrauiai, Dy. Advoccte iSeneral Shri Kanak Tiwari, Sr. Advocate wlth Shri Prateek Sharma, Advoccte; Shri Rajeey Bharat, Adyocate; For the petitionsrs in W.P. No.2504/2004. For the pstitioner in W.P. No.2503/2004. For the State/"esponde,"it: No.l and 3. For res ts No.2 .& For "espondent No.5. (Passed on|@'?A-February, 2005) i..fe. Writ Peti-rion No.2504/2004 filed by Mohamn-ied Safi iS, -ulan Singh and Writ Petition No.2503/2004 filed by (5opa! Agarwa! are being disposed of by this common order, as both these petitions relate to the sa;ns N.I.T. (Notice Invi'rin9 Tenders) dated 26-7-2004. (2) 3y these writ petitions the petitioners who ore engaged in 1"he business of transportation have challenged aiw questioned the propriet)- o-j- Page2ofl8 the clause 4.5 of the N.I.T. dated 26th/27th-7-2004 issued by respondent No.3. The said clause relates to the eligibilit/ criteria whereby the intending tenderers were required to possess the experience of transportation of food items of the fiovernment Department, Sovernment Under-takin9 or Semi Sovernment Department to the tune of Rs.75 lakhs in one financia! year during the last three preceding years i.e. 2001-02, 2002-03 and 2003-04. (3) Brief facts leadin9 to filing of these writ petitions are that the petitionsr No.l in W.P.No.2504/2004, as per averment made in the petition, is engaged in the business of transportation and has earned goodwi!! by his successful completion of work. The petitioner No.l has been undertakin9 the transportation work of food grains from respondent No.2 since last 10 years. In addition to that the petitioner No.l has atso been undertaking the work of transportation of food grains through Food Corporation of India since last 4 years and also transportation of Tendu leaves since last 20 years. T>ie petitioner No.2 is also a trcmsporter and he owns 3 trucks. He has been sngaged in the business of trouisportation for last 7 years. In the year 2002- 03, he has successfully completed the work of transportation of food grains awarded by respondent No.2. The petitioner in the Writ Petition No.2503/2004 is atso engaged in the business of tronsportation and he submitted his tenders, but he was not found eligibie as per the c!ause 4.5, therefore, he h<xs filed this writ petition. Respondent No.2 is the Sovernment Supply Department and in order to fulfill the welfare measure and to implement various (Sovernment schemes of distribution and supp!y of food grains i.e. wheat, rice, sugar, salt, etc. in al! corners of the State through various Public Distr-ibution System, by engaging tronsporters district-wise. This system is in vogue since last more than 15-20 years. The intending tenderers are required to quote rates of transportation differently for supply to different centers which are O to 25 kms, O to 50 km or so on. For the financial year 2004-05, respondent No.2 issued a tender notice (Annexure-P/2) on 3-2-2004 inviting tenders from the eiigible tronsporters for transportation of food grains in the District of Surguja in which 20 Page3ofl8 transporters including the petitioners submitted their tenders. Copy of chart showing kilometer wise towest tender is Annexure-P/3. However, as per the petitioners' case, the said tender was dropped because respohdent No.5 could not compete and ewerge as L-l. Then respondent No.2 again issued notice inviting tender on 27-4-2004 (Anenxure-P/5) in which also round about 20 transporters purchased the tender documents and submitted their tenders and competitive rates were achieved, but respondent No.2 again did not award the contract of tronsportation to the lowest bidder and in that tender a!so respondent No.5 could not compete and emerge as L-l. Again, the said tender was dropped and third time vide Annexure-P/8 dated 26-7-2004 again tenders in question were invited by the Collector, Surguja and not by respondent No.2. (4) Further case of the petitioners is that altogether a new eligibility criterion to the effect that tenderers must possess of tronsportation experience worth Rs.75 lakhs in respect of transpor-tation of food items of Sovernment, Semi fiovernment or Sovernment undertaking in any of the previous 3 years namely, 2001-02, 2002-03 and 2003-04. The petitioners have challenged this criteria by these writ petitions alleging that this eligibility criteria has been fixed with oblique purpose, by imposing such an arbitrary, discriminatory and unwarranted eligibilit/ criterion and the sams would expose that in order to eliminate the element of competition and to faci!itate the award of contract to respondent No.5 this new eligibili-ty criterion was created so that other otherwise eligible contractors including the petitioners may be completely eliminated and excluded at the threshold from the entire proceeding. Such a criterion is not insisted upon in any of the District in the State of Chhattisgarh in the matter of award of transportation work for the year 2004-05 that is in other 15 districts this eligibility criterion has not been fixed, therefore, the petitioners hcve challenged this eligibilit/ criterion on the following grounds: (i) that the said criterion is absolutely arbitrary, unreasonable and having no nexus with the obiect souaht to be achieved. fiil the said criterion has been included on <-^ Page4ofl8 extrdneous considerations and colourable exercise of power only with a view to ensure elimination of e!ement of competition which is against the public interest, (iii) the said criterion wili create monopoly ond has, in fact, resultec! in a monopoly in favour of respondent No.5 due to the absence of there being competition by otherwise eligible tenderers; and (iv) this eligibilit/ criterion is discriminatory on the ground +hat in other districts of the State of Chhattis9arh no such criterion was imposed by respondents and without such criterion havin9 been imposed the contract was awarded pursuant to tender proceedings. The tender proceeding is vitiated by an arbitrary, discriminatory, maiafides and be.mg violative of Articles 14 ond 19 (l)(g) of the Constitution of India, therefore, it has been prayed to quash the award of contract in favour of respondent No.5 and to quash whole proceeding taken up in pursuonce of the tender notice dated 26-7-2004, as also to quash clause 4.5 of the said eligibility criteria. (5) Return has been filed on behalf of respondents No.2 cuid 4 in which all the allegations have been denied and it has been mentioned that in the previous tenders the transporters quoted their rates even below the expenses to be incurred by the transporters in trcxnsporting the food grains. It has further been mentioned that perusal of Annexure-R/2,4/2 reveals that deliberately such lower rates were filled, which will not make the contract worth operation/execution. A cartel was formed of vested interests primarily to defeat the purpose of awardin9 of contract by respondent No.2 and 4 in the larger public interest, therefore, in order to check this malpractice, also in order to award the contract to the genuine transporter and looking to the situation and circumstances prevailing the said criterion has been fixed which is not in any way arbitrary, discriminatory or malafide. In the district of Surguja peculiar circumstances we.re. prevailing as also occasioned by the tenderers like the petitioners and others. It is prime duty of the respondents to protect the public interest and systematize the transportation of essential commodities to the pubiic at large without ony hue and cry or any further difficulty to the people. The eligibility criterion is not /^- Page5ofl8 in any way arbitrary. As a matter of fact, to eradicate corruption and the evil of formation of a cartel by offer'mg the lowest unworkable rates, some how, to grab the contract on the basis of lowest offer, which was not incumbent on the answering respondents to have agreed to petitioners among others have made a mockery of the said tender system. It is within the domain of the 6overnment and authorities to fix the eligibitit/ criterion and no judicial review is permissible in such a situation extraordinary jurisdiction of this Court cannot be invoked. The terms of the invitation to tender are not open to the judicial scrutiny the same being in the realm of contract ond the (Sovernment must have a frea hand in setting the terms of the tender. Therefore, the petitions be dismissed. (6) I haye heard Shri Manindra Shrivastava, 5?nior Advocate with Smt. Smita Ghai, Advocate for the petitioners in W.P. No.2504/2004, Shri Amit Sharma, Advocate for the petitioner in W.P. No.2503/2004, Shri N. K. Agrawal, Deputy Advocate Seneral for respondents No.l and 3, and Shri Kanak Tiwari, Senior Advocate with Shri Prateek Sharma, Advocate for respondents No.2 ouid 4. f7) Shri Manindra Shrivastava, learned Senior Counsel for the petitioners argued that the petitioners and other transporters we.re. successfully completing their contract regarding transportation of the food 9rains since last many years and in response to earlier N.I.T. dated 3-2-2004 (Annexure-P/2) ond the second N.I.T. dated 27-4-2004 (Annexure-P/5) the comparative rates were quoted by the transporters. In these two N.I.T.s respondent No.5 coutd not compete and emerge as L-l, therefore, in order to favour him respondents No.2 to 4 devised a new criterion in which condition regarding hwing transported food items worth Rs.75 lakhs in a year was incorporated in order to eliminate the petitioners and other transporters and to ensure that the contract is awarded to respondent No.5. This eligibilit/ cr-iterion was fixed without having dny nexus with the object sought to be achieved, the same being without any rationale and, therefore, it is arbitrary, unreasonable, discriminatory ond that amounts to create monopoly and reduce Page6ofl8 the element of cotnpetition. He further ar9ued that except this district, in other 15 districts of the State of Chhattisgarh no such eligibility criterion was fixed omd the tenders were accepted in the first instonce itself ond on this ground also it is arbitrar/, ir-rational and unreasonable. The said criterion is fixed for extrouieous considerations and colourable exercise of the power with a view to ensure elimination of the element of competition which is against the public interest and it will result in unnecessary burden on the public exchequer which is evident from the fact that contract has been awarded to respondent No.5 on much higher rates than quoted by the petitioners in previous N.I.T.s. 5hri Amit Sharma, counsel for the petitioner in W.P. No.2503/2004 adopted the arguments advanced by Shri Manindra Shrivastava, learned Senior Counsel and he further submitted that he is pressing only the ground of eligibilit/ criteria. (8) On the other hand, Shri Kanak Tiwari, learned Senior Counsel on behalf of respondents No.2 and 4 ouid Shri N. K. Agrawal, learned Deputy Advocate Seneral on behalf of respondents No.l and 3 argued that the term of contract that is fixing of eligibility criterion is within the domain of the State fiovernment and it cannot be a subject matter of judicial review, as respondents must haye freedom to fix the eligibility criterion looking to the ground reality and situation. They are the best judges to decide the eligibi!ity criterion and it is not for the Court or the petitioners to ask the respondents to fix a particular eligibility criterion and it is the best criterion unless the action is held to be arbitrary, unfair and actuated with bias. They further submitted that bare perusal of the previous rates regarding transportation as shown in the chart Annexure-R-2,4/4 makes it clear that after 2001-02 the rates quoted by the transporters we.re going down so low every year that rates quoted by them were much less than the expenses being incurred by them in running the trucks. This fact itself was disturbing, there were complaints regarding non-distribution of the food items and even malpractices were detected by the Collector, therefore, the Collector wrote a letter to respondent No.2 for fixing a particular rate and to devise some Page7ofl8 system to have proper transportation system cmd in that back9round, looking to the lower rates cited by the tenderers, first two N.I.T.s were cancelled and the Cotlector, respondent No.3, who is the solitary custodian on behalf of the Sovernment of the district to ensure proper distribution of food items and essential commodities, vide letter Annexure-R-2,4/9 suggested that in order to check the black-marketing, malpractice and to ensure proper distribution of food items, condition of having minimum experience of tnxnsportation of food items worth Rs.75 lakhs was required to be incorporated and the same was adopted. Even the district Collector convened a meeting of the tronsporters which was attended by the Joint Collector, Re9ional Transport Authority, bistrict AAanager of respondent Cor'poration, District Marketing Officer and the President of the Transport Association. In that meeting also apart from the other conditions, in item No.5, it was decided that in the eligibility criterion financia! status and experience of 3 years shoutd be included and a minimum rate should also be fixed. In order to have better competition and reasonable rote and to have best trcnsporter the said condition was inserted. Therefore, the petitioners' petitions are devoid of any merit. (9) Having heard learned counsel for the parties and having perused the record, I have considered the case law on the point. It is an admitted position that the main work of respondents No.2 to 4 is to ensure proper supply of the food items like Wheat, Sugar, Rice, Salt etc. under the Public Distribution System to whole of the district of Surguja, therefore, in the strict sense the public element is att-ached with the respondents and the State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just. The Preamble of the Constitution of India resolves to secure to all its citizens justice, social, economic ond political; and Equality of status and opportunity. Every S-l-ate action must be aimed at achieving this goai. Every holder of a public office by virtue of which he acts on beholf of the State or public body is ultimateiy accountable to the people in whom the sovereignty vests. As such, all powsrs PageSoflg so vested in him are meant to be exercised for public good dnd promoting the public interest. This is equatty true of all actions even in the fields 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. The Hon'ble Apex Court in the cose of Shrilekha Vidyart-hi Vs. State of U.P. reported in AIR 1991 SC 537 observed that no doubt, it is true, as indicated by us earlier, that there is a presumption of validity of the State action and the burden is on the person who alleges violation of Article 14 to prove the assertion. However, where no plausible reason or principle is indicated nor is it discernible aind the impugned State action, therefore, appears to be ex facie arbitrar/, the initial burden to prove the arbitrariness is discharged shifting onus on the State to justify its action as fair and reasonable. If the State is unable to produce material to justify its action as fair and reasonable, the burden on the person alleging arbitrariness must be held to be discharged. In Dwarkadas Marfatia's case (AIR 1989 SC 1642) the Court held that to oversee the State action for the purpose of satisfying that it is not vitiated by the vice of arbitrariness and no more. The wisdom of the policy or the lack of it o" the desirobility of a better alternative is not within the permissible scope of judicial reviews in such cases. It is not for the Courts to recast the policy or to substitute it with another which is considered to be more appropriate, once the attack on the ground of arbitrariness is successfully repeiled by showing that the act which was done, was fair ond reasonable in the facts and circumstances of the case. (10) The Hon'ble Apex Court in the case of Tata Cellular Vs. Union of India reported in AIR 1996 SC 11 held that the principles of judicial review would apply to the exercise of contractual powers by Sovernment bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review Sovernment is the guardian of the finances of the State. It is expected to protect the Page 9 of 18 financjal interest of the State. The right to refuse the lowest or any other tender is always available to the (Sovernment. But, the principles Inid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Sovernment tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. The Court further observed that the dut/ of the Court is to confine itself to the question of legality. Its concern should be; (1) whether a decision-making authority exceeded its'powers? (2) committed an error of law; (3) committed a brea.ch of the rules of natural justice; (4) reached a decision which no reasonable Tribunal would have reached; or (5) abused its powers. Ther-efore, it is not for the Court to determine whether particular policy or particular decision taken in the fulfitlment of that poiicy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from ca.se to case. Shortly put, the grounds upon which cn administrative action is subject to control by judicial review can be ctassified as under: (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power- and must yve effect to it. (ii) Irrationatity, namely Wednesbury unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by government bodies are; (1) The modern trend points to judicial restraint in administrative action. (2) The Court does not sit as a Court of appeal but merely rsviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative decision. If a review of the administr'ativ& ^-E" Pagel0ofl8 decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to the judicial scrutiny because the invitations to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a foirplay in the joints is a necessar/ concomitant for an administrative body functionin9 in on administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the aipplication of Wednesbury prindple of reasonableness (including its other facts but must be free from arbitrariness not affected by b'ms or actuated by mala fides. (6) Quashing decisions may impose heavy administratiye burden on the administration and lead to increased and unbudgeted expenditure. Therefore, in view of the above law laid down by the Hon'ble Apex Court that all the actions of the State are to be presumed to be vaiid and the burden is on the person who alleges violation of Article 14 to prove the assertion that the act of the State or public authority suffers from the vice of arbitrariness. (11) The Apex Court has held that while dealing with the case of arbitrariness, unreasonableness in the matter of contracts which are being entered by the (Sovernment, that the same is illegai, irrational and there is procedural impropriety, while looking into these aspects certain limitation has been laid down for judicial review of the decision as mentioned in the earlier part of this jud9ment while referring the cases decided by the Hon'ble Apex Court. (12) Again in the matter of Air India Limited v. Cochin International Airport- Limited reported in 2000 (2) SCC 617 the Hon'ble Apex Court held that: "The award of a contract, whether it is by a private part/ or by a public body or the State, is essentially a commercial transaction. In arriying at a commercial decision considerations which are __ -—- - PagelloflS paramount, are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its ovm terms of invitation to tender cmd that is not open to Judicial scru+iny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not aitways be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court cnn examine the decision-making process and interfere if it is bound vitiated by mala fides, unreasonableness and arbitrariness." Also in the matter of Monarch Infrastructure (P) Ltd. V. Commissioner", Ulhasnagar Municipal Corporation and others reported in 2000 (5) SCC 287 the Hon'ble Apex Court held that: "The terms and conditions in the tender are prescribed by the Sovernment bearing in mind the nature of contract and in such matters the authorit/ callin9 for the tender is the best judge to prescribe the terms and conditions of the tender. It is not for the Courts to say whether the conditions prescribed in the tender under considerations were better than the one prescribed in the earlier tender invitations." (13) After considering all the judgments, again in the matter of Directorate of Education and others V. Educonip Datamatics Ltd. and others reported in 2004 AIR SCW 1505 the Hon'ble Apex Court held that; "The terms of the invitation to tender are not open to judicial scrutiny the same being in the reolm of contract. The (&ovt. must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessar/ concomitant for- an administrative body in an