Case: Union Of India  Vs. Dinesh Engg Corpn.

The brief facts necessary for disposal of the appeals are as follows :The respondent M/s. Dinesh Engineering Corporation (hereinafter referred to as "the writ petitioner") claims to manufacture certain spare parts of GE governors used by the Indian Railways to control the speed in diesel locomotives. It is stated that originally the diesel governor was manufactured only by M/s. General Electric Company of the United States of America ("GE" for short) and till the year 1974, the same was being imported as also its spare parts. Thereafter, while stopping the import of governors in regard to the spare parts required for replacement in the governors manufactured by General Electric Co., the Railways were approaching the local manufacturers.Onit is stated that a tender was floated by the Controller of Stores, Diesel Locomotive Works, Varanasi, for supply of certain items of spare parts for use in GE governors. It is stated that only the writ petitioner responded to the tender but its tender was not considered nor was it rejected tillon which date the writ petitioner received a letter from the Director, Mechanical Engineering (Tr.), Diesel Locomotive Works, Varanasi, wherein it was informed that the Railway Board had reviewed the policy of purchase of GE/EDC governor spares in the context of sophistication, complexity and high degree of precision associated with governors. Consequently, its tender was not acceptable to the Railways.Challenging this decision of the Railways both in regard to the policy purported to have been adopted by the Board as also the rejection of its tender, the writ petitioner moved the High Court seeking a writ in the nature of mandamus commanding the respondents in the writ petition to finalise the offer of the writ petitioner regarding the tender and also for issuance of a writ of certiorari quashing the letter datedwritten by the Director, Mechanical Engineering (Tr.) in regard to purchase of spare parts.The High Court in the impugned order came to the conclusion on the basis of the material placed before it that the writ petitioner was manufacturing spare parts for GE governors and was supplying the same to various divisions of the Indian Railways who had found it to be satisfactory and, in regard to which, as a matter of fact, some of these divisions had also issued certificates of efficiency and appreciation. It also accepted the plea of the writ petitioner that the spare parts supplied by it were certified to have given satisfactory service by various divisions of the Railways like the Central Railway etc., and held that the writ petitioner was the sole competitor to M/s. Engineering DevicesControls (EDC) for the supply of spare parts in regard to GE governors. It also held that the policy put forth by the Railways in its letter datedamounted to creating a monopoly in favour of EDC and the same was wholly arbitrary and discriminatory. It also rejected the contention of the Railways that the tender notice datedwas rejected because the same was not in conformity with the terms of the tender. The High Court also rejected the contention of the Railways based on clause 16 of the Guidelines which gave a unilateral right to the Railways to reject the tender without assigning any reason. On the above basis, the High Court while allowing the writ petition held the orders of the Railways datedi.e. rejecting the tender of the writ petitioner and the letter datedreflecting the policy of the Railways in regard to purchase of spare parts for the governors were quashed.As stated above, it is against this judgment that these appeals have been preferred before this Court. It is to be noted that this Court having stayed the operation of the impugned judgment of the High Court, in the normal course, these appeals could have been disposed of as having become infructuous, but the appellant contended that the issue involved in these appeals is of substantial importance to the Railways and in view of the observations of this Court while granting "leave" in these appeals, irrespective of the final outcome of the impugned tender in the original writ petition, the question involved requires consideration by this Court.It is to be noted that this Court while granting "leave" onobserved :"Since this is a matter which can be decided on the present set ofno printing is necessary. The matter is otherwise urgent and requires settling so that the Railways should know how to deal with the matter of the kind. This may be listed in the month of November 1994 subject to the pleasure of My Lord the Chief Justice. Liberty to mention, if necessary." * As things would have it, though the matter was listed for hearing starting fromfor various reasons mentioned in the orders concerned the matter was not taken up for hearing until the same reached the stage of hearing this day before us. Therefore, we have considered it appropriate to decide these appeals on their merits.

Court's reasoning:
A perusal of the said letter shows that the Board adopted this policy keeping in mind the need to assure reliability and quality performance of the governors and their 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 spares should be procured on proprietary basis from EDC. This policy proceeds 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 that the decision of the Board as found in the letter datedsuffers from the vice ofof mind. On behalf of the appellants, it has been very seriously contended before us that the decision vide letter datedbeing in the nature of a 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 not 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 datedit is seen that the Railways took the decision to create a monopoly on proprietary basis on EDC on the ground that the spares required by it for replacement in the governors used by the Railways required a high degree of sophistication, complexity and precision, 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 quality product which can adhere to the strict scrutiny/standards of the Railways, but then 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 that matter, was the Board alive 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 perusal of the letter dateddoes not show that the Board was either aware of the existence of the writ petitioner 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 the Constitution.It isan admitted case that EDC 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 status of EDCthe 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 bysuch 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 EDC in the supply of spare parts to be used in the governors by the Railways, ever 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 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 EDCsuffers 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 datedis 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 EDC without calling for tenders and considering the offers received on merits.