Case: Nagar Nigam,Meerut Vs. Al Faheem Meat Exports Pvt.Ltd

in the activities of the State and public authorities. They should undoubtedly act fairly. Their actions should be legitimate. Their dealings should be above board. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favoritism or nepotism. Ordinarily, these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly. But that is not the only rule. As O.Chinnappa Reddy, J. observed, that though that is the ordinary rule, it is not an invariable rule. There may be situations necessitating departure from the rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience. 18. The law is, thus, clear that ordinarily all contracts by the Government or by an instrumentality of the State should be granted only by public auction or by inviting tenders, after advertising the same in well known newspapers having wide circulation, so that all eligible persons will have opportunity to bid in the bid, and there is total transparency. In our opinion this is an essential requirement in a democracy, where the people are supreme, and all official acts must be actuated by the public interest, and should inspire public confidence. 19. In the present case, unfortunately, the High Courts attention was not drawn to the aforementioned legal principles. 20. Furthermore, we see force in the submission of Mr. Jayant Bhushan, learned senior counsel for the appellant, that it was not for the High Court to fix the terms and conditions of the Contract. It is for the state authorities to take a policy decision and fix the terms and conditions of the Contract. It is one thing to say that the High Court in exercise of power of judicial review may strike down the contract or a notice inviting the tender if it offends Article 14 of the Constitution of India, but it is another thing to say that the High Court in exercise of the power of judicial review would thrust a contract upon a non-willing party particularly when the said exercise would be violative of Article 14 of the Constitution. Yet again, save and except in some very rare and exceptional case, the question of fixing any terms of the Contract or laying down the terms and conditions is for the concerned authority to decide, and it is not a matter within the domain of the Courts. In this behalf, we may refer to a decision of this Court in Association of Registration Plates vs. Union of India & Ors. reported in (2005) 1 SCC 679 , wherein this Court opined: The fifteen years contract period has also been supported by the Union of India and State authorities. We find great substance in the submissions made on the data supplied as a justification for awarding the contract for a long period of 15 years. There would be a huge investment required towards the infrastructure by the selected manufacturer and the major return would be expected in initial period of two years although he would be bound down to render his services for future vehicles periodically for along period. Looking to the huge investment required and the nature of the job which is most sophisticated, requiring network and infrastructure, a long-term contract, if though viable and feasible, cannot be faulted by the court. If there are two alternatives available of giving a short-term or a long-term contract, it is not for the court to suggest that the short-term contract should be given. On the subject of business management, expertise is available with the State authorities. The policy has been chalked out and the tender conditions have been formulated after joint deliberations between authorities of the State and the intending manufacturers. A contract providing for technical expertise, financial capability and experience qualifications with a long term of 15 years would serve the dual purpose of attracting sound parties to stake their money in understanding the job of supply and safeguard the public interest by ensuring that for a long period the work of affixation of security plates would continue uninterrupted in fulfillment of the object of the scheme contained in Rule 50. Our considered opinion, therefore, is that none of the impugned clauses in the tender conditions can be held to be arbitrary or discriminatory deserving their striking down as prayed for on behalf of the petitioners. (emphasis supplied) 21. In the present case, the respondent no.1 challenged the impugned advertisement dated 6.12.2004 issued by the Nagar Nigam. We have carefully perused the said advertisement and find no illegality in the same. It has been held by this Court in several decisions that the Court should not ordinarily interfere with the terms mentioned in such an advertisement. Thus in Global Energy Ltd. and Anr. vs. Adani Exports Ltd. and Ors. 2005(4) SCC 435 this Court observed (vide para 10): The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. 22. Similarly in Master Marine Services (P) Ltd. vs. Metcalfe & Hodgkinson (P) Ltd. and Anr. 2005 (6) SCC 138 , this Court held that the modern trend points to judicial restraint in reviewing the administrative action. The court does not sit as a court of appeal over such a decision but merely reviews the manner in which the decision was made. The court ordinarily would not interfere with an administrative decision. The Government must have freedom of contract. Some fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere.

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

Explanation:
1[ds]11. Indisputably Appellant-Corporation is a State within the meaning of Article 12 of the Constitution of India. It was constituted under the said Act which was enacted with a view to ensure better municipal governmence of the cities in the State of Uttar Pradesh. The statutory obligation on the part of the Municipal Corporation to build and/or maintain a hygienic slaughter house is not open to question. We have noticed hereinbefore that in terms of Sections 422 and 423 of the Act, the Corporation has various options. Such options, however, must be exercised by the Nagar Nigam itself having regard to the statutory scheme with a view to maintain public hygiene, but the same must be done in the light of the doctrine of life and liberty of a citizen as adumbrated under Article 21 of the Constitution. Such options cannot be exercised by the High Court, as that is no part of its functions. Maintenance and setting up of a slaughter house (abattoir) is a statutory responsibility of the Corporation. We may notice that the three Judge bench of this Court in Buffalo Traders Welfare Association vs. Union of India & Ors. (2004) 11 SCC 333 had issued certain directions to the Municipal Corporation of Delhi to construct both temporary and permanent slaughter house (abattoir) keeping in mind the future need of the city. This Court in the said case has been monitoring construction of a modern slaughter house in Delhi. However, the question who should be given the contract for the slaughter house and on what terms, is for the Municipal Corporation to decide, and not for the Courts. All that the Courts can do is to ensure that there is no arbitrariness on the part of the Municipal authorities13. This Court time and again has emphasized the need to maintain transparency in grant of public contracts. Ordinarily, maintenance of transparency as also compliance of Article 14 of the Constitution would inter alia be ensured by holding public auction upon issuance of advertisement in the well known newspapers. That has not been done in this case. Although the Nagar Nigam had advertised the contract, the High Court has directed that it should be given for 10 years to a particular party (respondent No. 1). This was clearly illegal14. It is well settled that ordinarily the State or its instrumentalities should not give contracts by private negotiation but by open public auction/tender after wide publicity. In this case the contract has not only been given by way of private negotiation, but the negotiation has been carried out by the High Court itself, which is impermissible15. We have no doubt that in rare and exceptional cases, having regard to the nature of the trade or largesse or for some other good reason, a contract may have to be granted by private negotiation, but normally that should not be done as it shakes the public confidence16. The law is well-settled that contracts by the State, its corporations, instrumentalities and agencies must be normally granted through public auction/public tender by inviting tenders from eligible persons and the notification of the public-auction or inviting tenders should be advertised in well known dailies having wide circulation in the locality with all relevant details such as date, time and place of auction, subject-matter of auction, technical specifications, estimated cost, earnest money Deposit, etc. The award of Government contracts through public-auction/public tender is to ensure transparency in the public procurement, to maximise economy and efficiency in Government procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution. However, in rare and exceptional cases, for instance during natural calamities and emergencies declared by the Government; where the procurement is possible from a single source only; where the supplier or 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., this normal rule may be departed from and such contracts may be awarded through private negotiations18. The law is, thus, clear that ordinarily all contracts by the Government or by an instrumentality of the State should be granted only by public auction or by inviting tenders, after advertising the same in well known newspapers having wide circulation, so that all eligible persons will have opportunity to bid in the bid, and there is total transparency. In our opinion this is an essential requirement in a democracy, where the people are supreme, and all official acts must be actuated by the public interest, and should inspire public confidence19. In the present case, unfortunately, the High Courts attention was not drawn to the aforementioned legal principles20. Furthermore, we see force in the submission of Mr. Jayant Bhushan, learned senior counsel for the appellant, that it was not for the High Court to fix the terms and conditions of the Contract. It is for the state authorities to take a policy decision and fix the terms and conditions of the Contract. It is one thing to say that the High Court in exercise of power of judicial review may strike down the contract or a notice inviting the tender if it offends Article 14 of the Constitution of India, but it is another thing to say that the High Court in exercise of the power of judicial review would thrust a contract upon a non-willing party particularly when the said exercise would be violative of Article 14 of the Constitution. Yet again, save and except in some very rare and exceptional case, the question of fixing any terms of the Contract or laying down the terms and conditions is for the concerned authority to decide, and it is not a matter within the domain of the CourtsIn our opinion, such a policy decision may be required to be taken keeping in view the health and welfare of a large number of inhabitants of the vicinity where such abattoirs are functioning, as also vis-à-vis the health of the inhabitants of the locality, which is a fundamental right under Article 21 of the Constitution of India. If a policy decision is taken by the State, it goes without saying that the appellant-Corporation in future may act in terms thereof, unless otherwise provided for by the Statute27. Although the matter is not before us, however, keeping in view the fact that now it is widely felt that a modern abattoir should be constructed, as was noticed by this Court in Buffalo Traders Welfare Association (supra), which ensures hygiene and sanitation, we would request the High Court to consider the desirability of disposing of Civil Misc. Writ Petition No. 11069/2006 (Asaf Ali vs. State of U.P. & Ors.) as expeditiously as possible. Save and except the aforementioned directions, we are of the opinion that the Corporation may work out the other modalities as it deems fit and in accordance with law. If respondent No.1 has deposited any amount for the modernization of the plant, which has not been carried out, the Corporation may refund the amount subject to any outstanding dues.