Case: Smita Conductors Ltd Vs. Dinesh Engineering Corporation

would have been an acceptable arguemnt if EDC was manufacturing GE-gevernors itself. It is an admitted case that ESC manufactures its own governors and not GE-governors nor are they licensed to manufacture GE-governors. All and any/sundry governors manufacturer cannot be treated as a manufacturer of original equipment for the supply of spares for GE-governors. THe statutes of EDC vis-a-vis the writ petitioner will be the same in regard to the supply of spares to GE-governors. This observation of ours does not of course amount to giving a certificate of approval to the writ petitioner as to the spare parts manufactured by it or that it is compatible with the GE-governors. That is a matter to be decided by the experts but suffice it to say that the writ petitioner cannot be excluded from consideration for the supply of spare parts to the GE-governors on the sole ground that it does not manufacture governors by itself. 15. Here it is to be noted that substantial number of governors used in the locomotives of the Indian Railways are those manufactured by GE, therefore, the requirement of spare parts ae also substantial for replacement in these governors. Hence, the Board ought not to have created a monopoly in favour of the EDC. It is, however, open to the Railways if it comes to the genuine conclusion that the spare parts manufactured by the writ petitioner are not acceptable on the ground of sophistication, complexity and high degree of precision then certainly it is for the Railways or for that matter if the terms of offer are not acceptable for justifiable reasons, it will be open to the Railways to reject the offer of the writ petition. But then, none of the above form the basis for creating a monopoly in favour of the EDC. As held by the High Court, that creation of this monopoly in favour of the EDC is unreasonable and arbitrary with which we agree. 16. Coming to the second question involved in these appeals, namely, the reaction of the tender of the writ petitioner, it was argued on behalf of the appellants that the Railways under clause 16 of the Guidelines was entitled to reject any tender offer without assigning any reasons and it also has the power to accept or not to accept the lowest offer. We do not dispute this power provided the same is exercised within the realm of the object for which this clause is incorporated. This does not give an arbitrary power to the Railways to reject the bid offered by a party merely because it has that power. This is a power which can be exercised on the existence of certain conditions which in the opinion of the Railways are not in the interest of the Railways to accept the offer. No such ground has been taken when the writ petitioners tender was rejected. Therefore, we agree with the High Court that it is not open to the Railways to rely upon this clause in the Guidelines to reject any or every offer that may be made by the writ petitioner while responding to a tender that may be called for supply of spare parts by the Railways. Mr. Iyer, learned senior counsel appearing for the EDC, drew out attention to a judgment of this Court in Sterling Computers Ltd. etc. v. M/s. M & N Publications Ltd. & Ors., 1993(1) SCC 445, which has held : "Under some special circumstance a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts, such decisions are upheld on the principle laid down by Justice Holmcs, that courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of "play in the joints" to the executive." 17. But then as has been held by this Court in the very same judgment that a public authority even in contractual matters should not have unfettered discretion and in contracts having commercial element even though some extra discretion is to be conceded in such authorities, they are bound to follow the norms recognised by courts while dealing with public property. This requirement is necessary to avoid unreasonable and arbitrary decisions being taken by public authorities whose actions are amenable to judicial review. Therefore, merely because the authority has certain elbow room available for use of discretion in accepting offer in contracts, the same will have to be done within the four corners of the requirements of law especially Article 14 of the Constitution. In the instant case, we have noticed that apart from rejecting the offer of the writ petitioner arbitrarily, the writ petitioner has now been virtually debarred from competing with the EDC in the supply of spare parts to be used in the governors by the Railways, even since the year 1992, and during all this while we are told the Railways are making purchases without any tender on a proprietary basis only from the EDC which, in our opinion, is in flagrant violation of the constitutional mandate of Article 14. We are also of the opinion that the so-called policy of the Board creating monopoly of EDC suffers from the vice of non-appplication of mind, hence, it has to be quashed as has been done by the High Court. 18. As stated above, so far as the tender dated 9.12.1991 is concerned, the same has become infructuous by passage of time, hence, the relief granted in this regard by the High Court has also become infructuous. however, we are in agreement with the High Court that the Board cannot purchase the spare parts under a proprietary basis from the EDC without calling for tenders and considering the offers received on merits.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. A perusal of the said letter shows that the Board adopted this policy leeping in mind the need to assure reliability and quality performance of the governor and its spare parts in the context of sophistication, complexity and high degree of precision associated with governors. It is in this background that in para (i) the letter states that the spare should be procured on proprietary basis from EDC. This policy proceedings on the hypothesis that there is no other supplier in the country who is competent enough to supply the spares required for the governors used by the Indian Railways without taking into consideration the fact that the writ petitioner has been supplying these spare parts for the last over 17 years to various Divisions of the Indian Railways which fact has been established by the writ petitioner from the material produced both before the High Court and this Court and which fact has been accepted by the High Court. This clearly establishes the fact has been accepted by the High Court. This clearly establishes the fact that the decision of the Board as found in the letter dated 23.10.1992 suffers from the vice ofof mind. On behalf of the appellants, it has been very seriously contended before us that the decision vide letter dated 23.10.1992 being in the nature of a policy decision, it is not open to courts to interfere since policy decision, it is not open to courts to interfere since policies are normally formulated by experts on the subjects and the courts not being in a position to step into the shoes of the experts, cannot interfere with such policy matters. There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of a policy decision. But then this does to mean that the courts have to abdicate their right to scrutinise whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record. It is with this limited object if we scrutinise the policy reflected in the letter dated 23.10.1992, it is seen that the Railways took the decision to create a monopoly on proprietary basis as EDC on the ground that the sphere required by it for replacement in the governors used by the Railways required a high degree of sophistication, complexity and preorsion, and in the background of the fact that there was no party other than EDC which could supply such spares. There can be no doubt that an equipment of the nature of a spare part of a governor which is used to control the speed in a diesel locomotive should be a qualify product which can adhere to the strict scrutiny/standards of the Railways, but the pertinent question is : has the Board taken into consideration the availability orof such characteristics in the spare parts supplied by the writ petitioner or, for the matter, was the Board above to the fact that like EDC the writ petitioner was also supplying the spare parts as the replacement parts for the GE governors for the last over 17 years to the various Divisions of the Railways. A persual of the letter dated 23.10.1992 does not show that the Board was either aware of the existence of the writ petition or its capacity or otherwise to supply the spare parts required by the Railways for replacement in the governors used by it, an ignorance which is fatal to its policy decision. Any decision be it a simple administrative decision or a policy decision, if taken without considering the relevant facts, can only be termed as an arbitrary decision. If it is so then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of theis an admitted case that ESC manufactures its own governors and notnor are they licensed to manufactureAll and any/sundry governors manufacturer cannot be treated as a manufacturer of original equipment for the supply of spares forTHe statutes of EDCthe writ petitioner will be the same in regard to the supply of spares toThis observation of ours does not of course amount to giving a certificate of approval to the writ petitioner as to the spare parts manufactured by it or that it is compatible with theThat is a matter to be decided by the experts but suffice it to say that the writ petitioner cannot be excluded from consideration for the supply of spare parts to theon the sole ground that it does not manufacture governors by itself.held by the High Court, that creation of this monopoly in favour of the EDC is unreasonable and arbitrary with which wesuch ground has been taken when the writ petitioners tender was rejected. Therefore, we agree with the High Court that it is not open to the Railways to rely upon this clause in the Guidelines to reject any or every offer that may be made by the writ petitioner while responding to a tender that may be called for supply of spare parts by thethe instant case, we have noticed that apart from rejecting the offer of the writ petitioner arbitrarily, the writ petitioner has now been virtually debarred from competing with the EDC in the supply of spare parts to be used in the governors by the Railways, even since the year 1992, and during all this while we are told the Railways are making purchases without any tender on a proprietary basis only from the EDC which, in our opinion, is in flagrant violation of the constitutional mandate of Article 14. We are also of the opinion that thepolicy of the Board creating monopoly of EDC suffers from the vice ofof mind, hence, it has to be quashed as has been done by the High Court.As stated above, so far as the tender dated 9.12.1991 is concerned, the same has become infructuous by passage of time, hence, the relief granted in this regard by the High Court has also become infructuous. however, we are in agreement with the High Court that the Board cannot purchase the spare parts under a proprietary basis from the EDC without calling for tenders and considering the offers received on merits.