Case: Smita Conductors Ltd Vs. Dinesh Engineering Corporation

2. The respondentM/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 wa 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. 3. On 9.12.1991, it 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 till 23.10.1992 on which date the writ petitioner received a letter from the Director, Mechanical Engineering (Tr.), Diesel Locomotives Works, Varanasi, wherein it was informed that the Railway Board had reviewed the policy of purchase ofgovernor spares in the context of sophistication, complexity and high degree of precision associated with governs. Consequently, its tender was not acceptable to the Railways. 4. Challenging this decision of the Railways both in regard to the policy purposed 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 finalse the offer of the writ petitioner regarding the tender and also for issuance of a writ of ceritorari quashing the letter dated 23.10.1992 written by the Director, Mechanical Engineering (Tr.) in regard to purchase of spare parts. 5. The High Court in the impugned order came to the conclusion that 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 space parts supplied by it were certified to have given satisfactory service by various Divisions of the Railways like the Central Railways 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 toIt also held that the policy put forth by railways in its letter dated 23.10.1992 amounted 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 dated 9.12.1991 was 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 dated 14.7.1993 i.e. rejecting the tender of the writ petitioner and the letter dated 23.10.1992 reflecting the policy of the Railways in regard to purchase of spare parts for the governors were quashed. 6. 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. 7. It is to be noted that this Court while granting `leave on 12.8.1994 observed : "Since this is a matter which can be decided on the present set of paper books, no pricing 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." 8. As things would have it, though the matter was listed for hearing starting from 24.1.1995, for various reasons mentioned in the concerned orders 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:
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.