Case: Kaprecon Sleeper Works Private Limited &amp; Others Vs. Union of India, Through The Chairman Railway Board, Ex.Officio Principal Secretary, Ministry of Railway &amp; Others

Facts in Writ Petition No.1907 of 1998 :2. On or about 13.3.1981, the petitioner/Company was awarded a Contract bearing no. W.188.C.360 with the respondent/Railway to supply two lakh ten thousand units of Monoblock Prestressed Concrete Sleepers (hereinafter referred as MPCS units) to the Railways. The respondents had enhanced the above order by further two lakh MPCS units of 60 KG specifications. The petitioner/Company manufactured and supplied the MPCS units and have received payments from the respondents. On 24.9.1990, the respondent awarded the first repeat order for manufacture and supply of 7,50,000/On 27.6.1997, respondents had decided to invite open tenders for procurement of total 76,00,000 MPCS units from various factories. Respondent/Railways decided to exercise the negative option as set out in clause 7.2 of the Contract Agreement to modify and reduce the number of MPCS units from 6,75,000 to 4,72,500 to be manufactured and supplied from the petitioner/Company.

Court's reasoning:
26. Power to vary requirement of sleepers is reserved by Board and they have brought down the order quantity by 30%. This reduction obviously relates to total contractual number of unitsnot having any bearing on quantity still to be manufactured or supplied. Such reduction is in sole discretion of the purchaser, even as per agreed terms of contract. Variation in number of units needed will have impact on developmental activities of Railwayshence, has to be approved at Board level on the recommendation of the Zonal Railway. Condition of approval of Board or need of recommendation of the zonal authority therefor, is not for protection of petitioners but to safeguard the functioning of Railwaysits administration. Here for valid reasons, contractual quantity has been brought down within permissible limits in public interest. Petitioners have not shown that the Board has curtailed the number of sleepers to be used by the Railwaystheir decision (impugned herein) prejudices the development works of Railway. None of the petitioners have demonstrated that their factory or establishment has suffered any loss because their machinery or manpower was lying idle. In fact, there is no such plea or proof. Railways only shifted the quantity reduced from repeat contract purchase to new tender contract purchase. Rates offered by petitioners in 1997 for tender purchase are to be paid to them for said quantity. Manufacturing activity of the petitioners continued unhamperedthey do not point out any adverse effect even in civil applications filed to bring on record the relevant subsequent events. In effect, their profit margin only has been reduced to certain extent and no loss as such is suffered by them. They only stand to gain less profit than expected. When earlier rate ie contractual rate was not arrived at after following transparent procedure flowing from Art. 14 of the Constitution of India, grievance of such a nature and of less profit cannot be entertained in the writ jurisdiction. Petitioners who have supplied earlier quantity at a much more rate have themselves quoted lesser rate in open competitive bidding. This conduct shows that earlier rate quoted by them has not been equitable and fair. It is not their argument that they quoted lesser rate in open tender because of more payment expected by them under repeat order. Not getting that profit ie projected expected profit did not have any adverse impact on their business. Action of public authority like Railway in avoiding loss of public revenue cannot be said to be arbitrary or erroneous. It is not malafide. Petitioners abused their standing in market for several yearsearned undue profits by charging Railways exorbitantly for sleepers which tantamount to nothing but causing wrongful loss to the public revenue. When constrained by the respondentscircumstances, they chose to offer lesser rates. We therefore find that no legal injury was suffered by any of the petitioners. Higher rate claimed by them even after acceptance of their tendered rate cannot be allowed or granted. They also cannot retain the benefit derived under interim orders of this court. Their contention that the quantity has been brought down retrospectively by the respondents is also not justifiedlegally sound. There is no scope for intervention under Art. 226 of the Constitution of India for judicial review in such a contractual matter.27. Reliance is also placed by the learned Counsel for the petitioners upon the ruling of NitinIndustrial Associates, Khamgaon .vs. State of Maharashtra and Others reported in 1986 Mh.L.J. 474. In this case, the act of respondent nos. 1 and 2 in ignoring the tenders and then again without rejecting or terminating the same, proceeding to allocate the two items amongst the three parties by the said resolution dt.3.8.1984 was held to be bad in law and the said resolution was quashed.The Respondents have pointed out that policy of allotting additional work to existing suppliers by issuing the repeat orders was discontinued in June 1997 and tenders were for the first time invited for supply of such units. Thus for the first time competitive bidding process was introduced and in it, Railway received offers to supply sleepers at a much lesser rates. Though there is some dispute about the exact difference in rate per unit offered to petitioners in the repeat contract and rate offered by petitioners in tender, we do not find it necessary to go into those details. Rate offered by petitioners for the same work in tender process is lower than the rate which they agreed to under repeat contract. If their stance is accepted, petitioners will be supplying same units at two different rates during same period. In any case, Railways will be purchasing sleepers at two different rates from same or different suppliers at onesame time. It looks not only anomalous but also arbitrary. Rate per unit determinedevolved through a valid competitive bidding is the only fairstandard rate constitutionally acceptable. When public revenue and public interest is involved, a situation leading to purchasing of sleepers at such standard ratehigher rate which derogates from fairnessspirit under Art. 14, can not be countenanced. It is apparent that effort of Railway to procure sleepers at such standard rate which is also less than the rate agreed with the petitioners cannot be said to be either arbitrary or erroneous or malafides exercise of power. In fact not taking the step as impugned in these petitions will be a fraud on public revenue8. In our view, the respondent/Railway Authority in the case in hand acted within its right to examine the repeat orders granted to the petitioners after the Contract initially entered into was already concluded long back. Respondent/Railway Authority exercised discretion to save public money wherever possible to award the work to the appropriate competitive bidders in the larger interest of the Railway administration. We do not find any compelling ground in the facts and circumstances to interfere with discretion exercised by the respondent/Railways in exercise of the extraordinary writ Jurisdiction.