Jammu & Kashmir High Court
Drangdhuran Hydro Power Consortium And ... vs Chenab Valley Power Projects Private ... on 28 January, 2017
Author: Tashi Rabstan
Bench: Tashi Rabstan
HIGH COURT OF JAMMU AND KASHMIR
AT JAMMU
OWP No.635/2016
MP No.01/2016
MP No.02/2016
Date of order: 28.01.2017
Drangdhuran Hydro Power Consortium and another
Versus
Chenab Valley Power Projects Private Limited and others
Coram:
Hon'ble Mr Justice Tashi Rabstan, Judge
Appearing Counsel:
For petitioner(s): Mr Z. A. Shah, Senior Advocate with
Mr Vipin Gandotra, Advocate
For respondent(s): Mr Sunil Sethi, Senior Advocate with
Mr Ankesh Chandel, and Mr Parimoksh Seth Advocates
i) Whether to be reported in Press/Media: Optional
ii) Whether to be reported in Digest/Journal: Yes.
1. Chenab Valley Power Projects Private Limited -
respondent No.1, which is a Joint Venture of National
Hydro Power Corporation Limited (NHPC), J&K State
Power Development Corporation Limited (JKSPDC) and
Power Trading Corporation India Limited (PTC),
responsible to plan, promote and organise an integrated
and efficient development of Pakal Dul, Kiru and Kwar
Hydroelectric Projects in Chenab River Basin in all its
aspects in the State of Jammu and Kashmir, intends to
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implement Pakal Dul (Drangdhuran) Hydroelectric Project
1000 MW (4 x 250 MW) in J&K and, as such, invited
sealed tenders vide Invitation of Bid (International
Competitive Bidding) bearing No.CVPP/ PD/MW/RB/TK/
2013 dated 19th June 2013, for ―Turnkey Execution‖ of
Pakal Dul (Drangdhuran) Hydroelectric Project from
Consortia/Companies through International Competitive
Bidding (ICB). The scope of work included all necessary
additional investigations, planning, design and
engineering, supply of equipments and materials, civil
construction, design, manufacturing, supply installation,
testing and commissioning. The project was to be handed
over to respondent No.1. One of the conditions contained
in Invitation of Bid, at condition No.13, was that the
―Owner shall have the right to reject all or any Bid and
shall not be bound to accept the lowest or any other Bid
or to give any reason for such decision‖.
2. Petitioner and proforma respondents 2 and 3 as well
responded to above Invitation of Bid. In all, five tenderers
responded. Of five, four tenderers were found sound,
including petitioner. However, respondent No.1 vide letter
No.CVPP/PD/MW/RB/TK-07/2016/2383 dated 16th
February 2016, informed petitioner that prices quoted by it
were substantially higher than estimated cost of works,
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based on CEA cleared/Government of India sanctioned
estimate of the project, the manner in which the price bid
had been structured involving unbalanced distribution
among various work components, large amount of front
loading and hedging of risks against Owner (respondent
No.1) did not infuse confidence on the consortium for
successful completion of project works and accordingly
conveyed cancellation of both ―Turnkey Tender‖ as also
―petitioner's bid‖.
3. Petitioner, aggrieved with decision of cancellation of
tender as also its bid, conveyed vide letter No.CVPP/PD/
MW/RB/TK-07/2016/2383 dated 16th February 2016, has
knocked at portals of this Court with writ petition on hand,
seeking quashment thereof, with further direction to
respondent to reconsider petitioner's tender for allotment
of Pakal Dul Project. The case set up by petitioner is:
a) Petitioner No.1 is consortium of three companies, i.e.
petitioner no.2 and proforma respondents 2&3, which had
entered into a Consortium Agreement dated 1st October
2013, for submitting a bid to respondent No.1, in
response to its Invitation to Tender for Turnkey execution
of Pakal Dul Hydro Electric Project in District Kishtwar,
Jammu. Petitioner no.2 is a company, duly incorporated
under provisions of Companies Act, 1956, having its
registered office at Patel Estate Road, Jogeshwari - (W),
Mumbai 400102, Maharashtra. Petitioner No.2 is lead
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partner of said Consortium, i.e. petitioner No.1, and is
duly authorised to act for and on behalf of petitioner
company and to institute present proceedings through
petitioner No.1, Mr Reshi Kumar Sharma, constituted
attorney of petitioner no.2, and by virtue of Resolution
dated 30th March 2016, duly adopted and passed by
Board of Directors of petitioner no.2; he is duly authorised
and empowered to institute and file proceedings.
Proforma respondent no.2 is a company, duly
incorporated under Laws of Turnkey. Proforma
respondent no.3 is a company, owned by Government of
India and duly incorporated under Companies Act, 1956.
The interest of petitioners and proforma respondents 2&3,
are common and similar and, as such, petitioner company
is claiming no relief against proforma respondents 2&3.
b) Respondent No.1 is an instrumentality/agency of the
State and all its directors are appointed/nominated by
Government of Jammu and Kashmir/Government of India.
There are no private shareholders in the company. The
decisions taken by said company are decision of the
Government and decisions of Government, its
instructions, etc. are binding on respondent company.
The company qualifies as a ―State‖ within the meaning of
Article 12 of the Constitution.
c) Respondent No.1 invited tenders vide NIT dated 19th
June 2013. Respondent No.1 had initially invited bids for
the said project on 12th August 2011 and in response
thereto, it was noticed that only few bidders could qualify
and their numbers was very less. Having regard to poor
response, respondent No.1 decided to retender for
execution of the said project. After second NIT dated 19th
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June 2013 was issued, petitioner company along with
proforma respondents responded thereto and submitted
their tender before due date.
d) Tendering process comprised of two stages. Every
prospective tenderer was required to submit his tender
with regard to ―Technical Qualifications Bid‖ in a separate
envelop and the ―Price Bid‖ contained in the second
separate envelop. In terms of the prescribed producers
the prospective tenderer was required to first submit his
―Technical Qualification Bid‖ and thereafter approximately
two months' time was granted to him to submit the
―Financial Bid‖. Accordingly respondents submitted their
―Technical Qualification Bid‖ and ―Price Bid‖ before its due
dates i.e. on 5th October 2013 and 30th November 2013
respectively.
e) In all respondent No.1 received five tenders. Out of five
tenderers, four tenderers were found ―Techno-
commercially sound‖ including petitioner and as such four
bidders qualified for stage two of the bidding process.
Petitioner received letter dated 8th January 2014 from
respondent No.1 as regards petitioner meeting
qualification criteria and its proposal found substantially
responsive for execution of the project.
f) Petitioner company was invited to be present on 3rd
February 2014 at the time of unsealing of ―Price Bid‖.
Petitioner's representative was present when ―price bids‖
were opened and it was found petitioner had submitted
lowest tender in comparison to other three tenderers. The
rate offered, on turnkey basis by four bidders whose
financial bid was opened were as follows:
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(i) Petitioner: - 9278.53 Crore
(ii) SCA Consortium: - 9627.61 Crore
(iii) Impregile-Gammon Consortium: - 9861.14 Crore
(iv) Soma-Song da PM Consortium: - 11403.59 Crore
Petitioner's price bid was reportedly recommended
by Tender Evaluation Committee (TEC) to Board of
Directors, which was followed by calling petitioner for
negotiations.
g) Petitioner was informed vide letter no.CVPP/PD/MW/RB/
TK-07/2014/826 dated 5th May 2014 that prices/rates
quoted by it in price bid are higher in respect of certain
components of work and therefore a discussion was
required with the company to justify and/or reduce the
prices/rates. Petitioner company was also informed that
discussions would include various aspects relating to
prices quoted in Bill of Quantities (BOQ) and any other
point, which might need clarification. In response thereto,
petitioner addressed communication No.100/3551/533
dated 7th May 2014, wherein petitioner company asked
for official confirmation of being lower bidder. Petitioner
company also expressed its willingness to discuss the
issue of prices/rates.
h) Having regard to response of petitioner company,
respondent No.1 vide letter no.CVPP/PD/MW/RB/TK-
07/2014/846 dated 9th May 2014 confirmed to petitioner
company that upon evaluation, petitioner company had
turned out to be lowest as per Article 19 of ―ITB‖ of Bid
document and for discussing issue, petitioner company
was further informed to come for discussion on 20th May
2014.
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i) The first meeting between parties took place on 7th June
2014. Respondent No.1 asked petitioner company to offer
a discount on its bid price. Responding to suggestion,
petitioner company explained to respondent No.1 that
their tender bid was based on E.P.C. (Engineering,
Procurement and Construction) arrangement and that
itemwise rates quoted by petitioner company were only to
relate cash flow and were not determinative of the price of
the work done at the time the bills were raised. The price
bid had been arranged in a manner that the overall price
remained what was being offered by petitioner company
but the payment was linked to various stages of work as
would come into existence during the execution of the
project as well as to BOQ. However, respondent No.1
insisted that in ―public interest‖, petitioner company
should offer discount notwithstanding the fact that
company had not offered ―item-rate contract rates‖.
Petitioner company sought time to respond. After
petitioner company had consultations with other members
of the Consortium, second meeting was fixed on 30th
June 2014 between the parties, upon request made in
this behalf by petitioner company. In the second meeting,
petitioner company responded to suggestion of
respondent No.1 and submitted that price quoted by them
was justified and that there was misevaluation and
misappreciation of financial bid by respondent No.1 in the
sense that respondent No.1 looked at the rates offered by
petitioner company ―itemwise‖ whereas the rates offered
were in the context of overall execution of work and timely
payment linked with the progress in the execution of the
project. Respondent No.1 insisted on discount and
linearization of certain items. At this stage petitioner
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company finds it relevant to mention that respondent No.1
had made its own estimate of total cost of the project and
while doing so item rate contract model had been taken
into consideration. On the contrary tenders invited by
respondent No.1, was on EPC Model and petitioner
company responded on ―EPC basis‖. The fundamental
difference between the two essentially lies in the risk
involved during execution relating to variation in
quantities, geological conditions including joint and
several responsibilities for the successful performance of
the plant with guaranteed output parameters as defined in
the bid documents, failing which huge penalties are
foreseen as per the terms and conditions of the Tender.
Petitioner company had submitted its tender in a manner
that the risks mentioned above were taken by it and was
made itself responsible for remedying them whereas in
the case of itemwise rates the risks are always that of the
contract allotting authority. It is because of the difference
in the approach to the evaluation of the financial bid that
the parties were negotiating. Petitioner company sought
further time to respond to the suggestion of respondent
No.1.
j) On 3rd July 2014, petitioner company informed
respondent No.1 the reasons and the basis of price
difference between the estimate of the project as
assessed by respondent No.1 and by petitioner company.
Parties again met for third time on 15th July 2014. Having
no choice in the matter and in the overall interests of the
project, its need by the State and above all public interest,
petitioner company offered discount of Rs.90.00 crore
and reduced its Bid price accordingly. Respondent No.1
appreciated response of petitioner company on the one
9
hand but at the same time on the other have again
insisted for further discount and linearization of rates. In
the context of discussions between the parties in the third
meeting, respondent No.1 asked petitioner company to
submit their response/justification and reduction in the
prices/rates along with various clarifications vide letter
no.CVPP/PD/MW/RB/TK/2014/1320 dated 23rd July 2014.
Petitioner company responded thereto vide its
communication No.100/3551/1565 dated 28th July 2014,
wherein petitioner confirmed reduction of the Bid price by
Rs.90.00 Crores and sought further time for reverting
back in the matter. After submitting response dated 28th
July 2014, petitioner company submitted a detailed
response vide their communication No.100/3551/1725
dated 9th August 2014, in which petitioner company
justified quoted rates highlighting major variations in
comparison with estimate of respondent No.1.
k) Fourth meeting was convened on 27th August 2014, as
was requested by respondent. In 4th meeting there were
further discussions and respondent No.1 insisted that
there should be further reduction in the Bid Price.
Respondent No.1 also insisted that there should be
further linearization of certain lump sum items in BOQ.
Placed in the situation and again in the overall interests of
public and execution of project, petitioner company further
reduced its Bid Price by Rs.35.00 Crores. It was followed
by a formal letter by petitioner company bearing
No.100/3551/1920 dated 28th August 2014, in which
petitioner company clarified the position and explained
the so-called difference between estimate of respondent
company and petitioner company involved in execution of
EPC contract. Petitioner company also in modification of
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payment by way of linearization of certain items/rates in
BOQ to suit the requirements of respondent No.1;
petitioner company also confirmed discount offered by it
in all amounting to Rs.125.00 Crore on the Bid price for
civil works.
l) In response to petitioner's communication, respondent
No.1 vide letter no.CVPP/PD/MW/RB/TK-07/2014/1612
dated 6th September 2014, made the observations that
petitioner company has not specified as to how they wish
to distribute/locate discount in the quoted prices and that
the discounted prices are not comparable with the
estimated cost and the prices are still on the higher side
particularly in the TBM works component. Petitioner
company was informed of the next meeting to review and
discuss the matter.
m) Before next meeting (5th meeting) was convened,
petitioner company was requested to extend the bid
validity of their bid by four months i.e. upto 31st January
2014 (it should reach 2015). A request for extension in
the bid security was also made vide letter dated
10thSeptember 2014.
n) 5th meeting was held between parties on 26th September
2014 and various aspects of matter were discussed and
respondent No.1 was keen to bring prices as close as
possible to the estimates which they had prepared at their
own level. Petitioner company keeping in view variety of
factors including the time span on negotiations, keeping
validity of security and tender document intact etc. finally
agreed to the following:
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(a) Petitioner company would reduce its Bid price by
Rs.75.00 Crore, in all making a reduction of Rs.200.00
Crore from their initial Bid price.
(b) Petitioner company also granted minimum interest
recovery of Rs.275.00 Crore on the advanced as and
when made available to it.
This was followed by a formal communication from
petitioner company vide No.100/3551/2295 dated 29th
September 2014. In this manner, petitioner company
substantially tuned its tender with the estimate already
prepared by respondent No.1. Petitioner company
represented to respondent No.1 that having regard to
reductions made including modification in linearization of
payment, contract be allotted to them. By this time nearly
two years had passed ever since bids were invited and
there was price escalation in all the inputs required in
execution of the project. Petitioner company, having
granted maximum discount and benefit to respondent
No.1, during the course of discussions, represented that it
had legitimate expectation in the allotment of the contract
and that the company did not have much to gain because
of the time taken by respondent No.1. At this stage
petitioner company finds it relevant to mention that
ordinarily their bid, which was lowest in comparison to all
other bidders, should have been accepted way back in
2013/14, but for insistence of respondent No.1 for
reduction of the prices and for making other modification,
petitioner company finally made aforesaid offer during
course of negotiations to respondent No.1.
o) While petitioner company was awaiting for formal
allotment of contract, it received another letter no.CVPP/
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PD/MW/RB/TK-07/2014/1961 dated 21st October 2014,
asking petitioner company to submit its revised cash flow
statement as per linearization and discount in the quoted
price offered by Consortium. Petitioner company was also
informed that Government of Jammu and Kashmir has
sanctioned exemption from the tax leviable on works
contract as well as entry tax in respect of 1000 MWE
Pakal Dul Project. Petitioner company was informed that
its Bid price shall be accordingly reduced. In response
thereto, petitioner company addressed communication
No.100/3551/2583 dated 24th October 2014, clarifying the
position consequent to grant of tax exemption by the
Government.
p) After putting all clarifications, discounts, exemptions etc.
the entire matter reportedly was discussed by the
Committee, which was corresponding with petitioner
company and had previously been set up by the Board of
Directors, had submitted its detailed report to the Board of
Directors and recommended allotment of contract in
favour of petitioner company. It appears to petitioner
company that no decision was taken. Instead petitioner
company was again called for further deliberations/
discussions. Responding thereto, representative of
petitioner company held first meeting with Directors
Committee on 15th December 2014. Once again Directors
Committee asked petitioner company to grant further
discount as also linearization in rates of certain items.
Petitioner company's representative sought time to
respond to the suggestion of Directors Committee.
q) Second meeting with Directors Committee was held on
22nd December 2014, in which petitioner company agreed
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for linearization of lump sum items to the satisfaction of
Directors Committee. Petitioner company did not agree to
any further discount. Company also provided clarification
of road works as required by Directors Committee. The
discussions were followed by letters from petitioner
company. On 13th January 2015, petitioner company was
requested to extend validity of its bid till May 31, 2015,
which was extended by petitioner company. On 23rd
March 2015, petitioner company submitted its cash flow
as per revised linearization and discount already offered
and clarification on WCT.
r) Petitioner company did not hear anything thereafter till
16th May 2015, when petitioner company was again
asked to extend its bid validity till 31st August 2015, which
was extended up to 31st August 20105 and thereafter
extended up to 30th November 2015. Again in view of
request, petitioner company extended its bid validity till
31st March 2016. No extension of bid validity beyond 31st
March 2016 was sought for by respondent No.1.
s) By March 2015, after petitioner company had last meeting
with Directors Committee on 22nd December 2014, there
were changes in Board of Directors. Two of Directors had
demitted their office and in their place only one person
was nominated in the Board of Directors.
t) Having regard to the fact situation it is clearly established
that decision to cancel tender is exercise of mala fide
power, arbitrariness, unreasonableness and defeats
rights of petitioner, apart from being violative of doctrine
of legitimate expectation.
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4. Above set of facts and submissions, according to
petitioner company, forced it to knock at portals of this
Court. The grounds of challenge are:
a) Rejection of petitioner company's tender notice is
clearly arbitrary and unreasonable. Respondent No.1
had a poor response when it for the first time invited
tenders for the project in August 2011. It took no steps
thereafter till June, 2013, when it decided to retender.
The delay of two years in inviting tenders, for no
reason or justification is patently contrary to public
interest in view of ever increasing costs.
b) After bids were invited in June 2013, at the global
level, out of five tenderers, four were found to have
qualified ―technical qualification‖. The 5th tenderer (a
Chinese company) approached the court of District
Judge at Jammu and obtained an interim order). It was
only on 1st February 2014 that the interim order was
vacated. After vacation of interim order, price bids
were opened on 3rd February 2014 and petitioner
company was found the lowest tenderer among the
four tenderers.
c) Negotiations were held with petitioner company
between 7th June 2014 to 22nd December 2014. During
this period petitioner company was asked to extend its
bid validity as well as that of bid security. Petitioner
company was asked to reduce its prices which it did by
Rs. 200.00 Crore. Petitioner company also offered
guarantee of Rs.275.00 Crore by way of minimum
interest on the advances. Petitioner company also
15
offered cash flow as per revised linearization and
discount.
d) Between 22nd December 2014 to 16th February 2016,
matter remained pending with respondent No.1 and
finally the tender was called in terms of impugned
order. Thus it is evident that from June 2013 February
2016, tendering process was kept alive and finally
rejected. Respondent has further invited two fresh
tenders after cancellation of Turnkey Tender in which
petitioner was declared lowest bidder.
e) Conduct of respondent No.1 is clearly arbitrary and
unreasonable as during the said period petitioner
company, after it offered its discount and cash flow
linearization, was expected award of contract as was
recommended in its favour by the Negotiations
Committee. Impugned communication records reasons
which are outside the purview of terms and conditions
of NIT and are clearly unsustainable being arbitrary
reasons based on no material. Irrelevant
considerations have entered the process of decision
making and petitioner company has been treated
unfairly. It was asked to keep its bid alive right from
June 2014 till 31st March 2016 and its securities.
Respondent No.1 while cancelling tender has failed to
take into consideration important elements involved in
decision making process. After evaluation of technical
bid and report of Negotiation Committee, there was no
basis before Directors Committee to justify cancellation
of tender. The present case demonstrates patent
arbitrariness and unreasonableness on part of
respondent No.1.
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f) Cancellation of tender and inviting fresh tenders are
patently against public interest. The project, which was
intended to be set up is one of the milestones in power
sector. Respondent No.1 was set up as a company
with prime purpose of setting up Hydel Projects. The
company has considerably delayed setting up of Hydel
Projects as a result of delay there is bound to be
escalation in the costs.
g) The decision of respondent No.1 is against public
interest because the cost per Megawatt involved in
setting up of Hydel Project, based on actual cost
incurred by the Government agencies for Hydel
Projects of similar nature, ranges between Rs.4.92
Crore per MW to 21.89 Crores per MW, which is
evident from the report of Negotiation Committee. The
cost considerably varies according to the site
conditions. The ultimate offer made by petitioner
company after it allowed discounts and government
granted exemption, was reduced to Rs.7790.10 Crore.
It would mean 7.79 Crore per MW for the EPC
component. The estimate made by respondent No.1
including above Bid Price for EPC component, which
was disclosed during the course of negotiations and
has been mentioned in the report of the Negotiation
Committee estimates the cost of per MW
approximately Rs.10.00 Crore. Negotiation Committee
had after comparison of rates also found that by delay
of one year the escalation in costs would be around
Rs.600.00 Crore apart from the revenue loss.
Petitioner company states that ordinarily the contract
with it should have been fixed way back in February
2014, when the Price Bids were opened and petitioner
17
company found to be lowest. Two years have been
wasted by respondent No.1 and as per the report of
Negotiations Committee any fresh tender as invited
now by respondent would involve additional cost of
approximately 1200 Crores on the same project.
Petitioner company, therefore, submits that in the
context of the finances required for setting up of the
project, the Directors Committee completely lost sight
of cost escalation and by cancelling petitioners' tender,
there is reason to believe that in the event the project
is retendered the cost will be much higher than what
was offered by petitioner company. Negotiation
Committee has given its detailed report showing
reasons as to why the contract was required to be
allowed to petitioner company. By rejecting tender and
inviting fresh tenders, respondent has acted contrary to
public interest and public exchequer.
h) Reasons recorded in impugned communication suffer
from non-application of mind, are baseless and are
unsustainable in the light of the facts of the case.
Petitioner company hereinafter deals with reasons ad
seriatim to demonstrate that the reasons are perverse.
(a) First reason recorded in impugned communication
relates to alleged gap of over Rs.300 Crore
between the bid price and estimated cost. It
submitted that alleged difference of Rs.300 Crore is
not that in the cost of the project. The difference is
only because under EPC mode all risks and
quantity variations mentioned by Negotiation
Committee in its report are responsibility of
contractor whereas in the estimated costs the risk
18
and also the variation in the quantities is
responsibility of owner. Impugned communication
mischievously represents the cost difference.
(b) Second reason stated in impugned communication
relates to item-wise rate mentioned in tender
document. It is stated that petitioner company has
by financial mobilization reduced requirement of
mobilization advance which would have otherwise
attracted interest and furnishing of bank guarantee.
The reasoning is perverse. Petitioner company
agreed to provide minimum interest guarantee of
Rs.275.00 Crore on the advances as may be made
to it by respondent No.1. Petitioner company
obviously would also furnish bank guarantees
against advances. So far as commission of TBM
(Tunnel boring Machine) is concerned, petitioner
company had rightly included it as an item of work
in Bill of Quantities (BOQ). Petitioner company had
already in their communication dated 22nd
December 2014 stated the reason as to why TBM
was included as an item of work in BOQ. It had
stated that it intended to avail machinery advance
against TBM in stages according to the payment
schedule of TBM manufacturer. The machine is
required by petitioner company in 21st month of its
working as also in 24th month of the project
execution. This aspect of the matter has also been
considered by the committee.
(c) Third reason recorded is equally perverse. Under
the tender, the work of planning, designing and
engineering works is responsibility of petitioner
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company and for this purpose petitioner company is
to engage its own Consultant to be paid by
petitioner company. It is absolutely irrelevant and
demonstrates non-application of mind to say that
PDE Consultant would be under control of petitioner
company when in terms of tender the Consultant is
required to hold sub-contract with petitioner
company to render services relating to planning,
designing and engineering. The service has to be
provided by Consultant to petitioner company which
is ultimately responsible for executing the contract.
It makes no sense to say that consultant of
petitioner company would be under influence of
petitioner company. That apart, each and every
specification, design and planning has to be
approved by respondent No.1 before putting it to
execution. Insofar as mention of Rs.55.00 Crore has
been made it relates to execution of civil works/site
facilities otherwise required for electro-mechanical
works (E&M). The work is to be executed by an
independent contractor who is otherwise also part of
Consortium but gets directly paid by respondent
No.1 in the event contract is concluded. The amount
mentioned reflect assessment made by petitioner
company in civil works/site facilities as may be
required during execution of work by E&M.
(d) Fourth reason recorded is equally fantastic and
perverse. It is the case of petitioner company
throughout that responsibility of risks, as explained
in the report of Negotiation Committee, is taken by
company and not by Owner. No risk has been
hedged against owner. To safeguard interests of
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respondent No.1, petitioner company is required to
furnish bank guarantee against advances as also
against performance. There is no threat to financial
status/existence of Consortium should any major
risk, event occur. The front loading of Rs.600.00
Crore is a figure misunderstood by respondent No.1
as would be evident from reason no.2, where taking
TBAM as a separate item has been questioned. It is
absolutely unreasonable to state that front loading
raises doubts about capability of Consortium. The
competent capability and experience of Consortium
has already been certified by respondent No.1 when
it found technical bind to be in order. Negotiation
Committee has already opined on this aspect of the
matter. The observations about the confidence are
patently subjective in character and based on
extraneous consideration
(e) All the reasons stated by respondent No.1 arise out
of wrong evaluation of tender documents, pattern of
EPC in working out contract, misunderstanding with
regard to the amount of front loading and failure to
appreciate that the risks are shared by petitioner
company to a great extent, impugned
communication seeks to justify cancellation of
tender on grounds and basis which are totally
uncalled for. Evaluation of entire tender made by
Director Committee, in ignorance of the views of
Negotiation Committee and in fact contradictions
thereto, is outcome of extraneous considerations
and mala fide. Petitioner company, therefore,
questions decision to cancel its tender not only on
ground of being arbitrary and against public interest
21
but even on merits. The decision making process is
itself contrary to law, discriminatory and arbitrary.
(f) Respondent No.1 has also relied on its power to
reject any tender. Article 1.2 clearly provides the
basis on which bids can be rejected. The
expression ―any other cause‖ appearing in the said
clause is to be read ejusdem generis with ―national
security‖. The jurisdiction of this Court to judicially
review the order rejecting tender of petitioner is not
excluded by Article 1.2. Respondent No.1 is not
entitled to cancel the bid under Article 1.2 of ―ITB‖.
The view taken by Directors Committee is contrary
to public exchequer as the same contract, if
retendered, would cost exchequer higher price than
the one offered by petitioner company.
(g) In view of course of events, ever since tenders were
submitted, negotiations held, discounts granted and
other benefits agreed to and allowed in favour of
respondent No.1, petitioner company had legitimate
expectation that the contract would be allotted to it.
Petitioner company was asked to keep validity of its
bid and security document alive throughout this
period which further lends support to the
expectations of petitioner company that the contract
would be allotted to it. Impugned action of
respondent No.1 violates doctrine of legitimate
expectation. It is inequitable on part of respondent
No.1 to have cancelled tender to the prejudice and
detriment of petitioner company.
(h) Action of respondent company has also been mala
fide. With the change of Directors, the whole
22
position was changed and a complete U-turn was
taken. Initially members of Negotiation Committee
failed to appreciate tender of petitioner company but
during course of negotiations when the things
became clear to them, the committee for well good
reasons recommended allotment of contract in
favour of petitioner company. The Directors who
took decision to cancel the tender suffered some
imperfection in their understanding of tender and
unreasonably compare the assessment of cost
between estimated cost and tendered cost. This
position had already been clarified in
communications by petitioner company and during
course of negotiations with Negotiation Committee.
the cause and reasons for front loading was also
explained as also inclusion of TBM as an item of
work in BOQ. All these aspects and all elements of
public interest were considered by Negotiation
Committee unlike the Directors Committee. the
Directors, who ultimately took decision some of
them were different form the Directors who had
earlier negotiated with petitioner company. The
Directors Committee, therefore, failed to appreciate
the clarifications/explanations of petitioner company
and thus erred in law in cancelling the tender.
5. Petitioner on the edifice of case set up and grounds
taken, seeks the relief:
"It is accordingly prayed that by an appropriate
writ, direction or order including a writ in the
nature of certiorari/mandamus communication
No.CVPP/PD/MW/RB/TK-07/2016/2383 dated
16.02.2016 be quashed and the fresh Notices
23
Inviting Tenders (NITs) against the said Project
be stayed and by writ of mandamus respondents
be directed to reconsider the tender of petitioner
company for allotment of Pakal Dul Project."
6. Writ petition on hand came to be filed on 27th April 2016.
It was listed before the Court on 30th April 2016. The
respondent No.1 was on caveat, who was represented by
its senior counsel. Caveat was discharged. Writ petition
was directed to be listed in week commencing 16th May
2016. Ad interim application (MPno.01/2016) was, after
hearing both parties, reserved for orders. It was on 2nd
May 2016 that orders were passed in ad interim
application (MP no.01/2016), keeping in abeyance
impugned communication dated 16th February 2016 with
liberty to respondent No.1, if it so chooses, to reconsider
the decision so taken, after hearing the petitioners and
the fresh tender notices issued regarding the project and
the bids, if any, received shall not be carried into effect till
next date before the Bench.
7. Respondent No.1, on 12th May 2016, filed its
objections in opposition to writ petition. Glance thereof
is imperative :
a) Writ petition is highly defective insofar as its very
maintainability on account of lack of authorization by other
two Companies i.e. respondents 2 and 3 in favour of the
petitioner No.1 - Consortium, to file writ petition is
24
concerned. Petitioner No.1 is a Consortium of three
companies i.e. petitioner No.1, respondents 2&3, for the
purpose of submitting a tender to respondent No.1 in
response to NIT dated 19th June 2013 for turnkey
execution of Pakal Dul (Drangdhuran) Hydroelectric
Project. The preamble of Joint pursuit as provided in
Article 1 of the Consortium agreement which has given
birth to petitioner No.1 - Consortium, fully defines three
companies viz. petitioner no.2, respondents 2&3, shall
collectively form an unincorporated Contractual
Consortium, namely, ―Drangdhuran Hydro Power
Consortium‖. Petitioner No.1 Consortium lacks basic
authority to file present writ petition as two other
companies with petitioner no.2 have not given any
authorisation for filing present petition. Further, with
cancellation of entire tendering process including tender
bids of petitioner No.1 Consortium, it has ceased to exist
as per Article 9 of the Consortium Agreement entered into
between petitioner no.2, respondents 2&3. The instant
writ petition has been filed by petitioner No.1 through
petitioner no.2 only whereas other two companies have
not authorised petitioner No.1 consortium to file present
petition. Since petitioner No.1 does not have original
authority to file instant writ petition, therefore, the same
deserves outright dismissal.
b) Petitioners have miserably failed to make out a case as
against respondent which requires judicial review by this
Court. For maintaining writ petition, seeking judicial
review of contracts, petitioners are required to establish
prima facie case, which warrants exercising of principles
relating to judicial review. The law relating to exercise of
judicial review coupled with judicial restraining in
25
government contract has been extensively discussed in
celebrated case of Tata Cellular v. Union of India1.
c) Petitioners have also miserably failed to establish a case
which warrants interference of this Court. Writ petition
filed by petitioners does not establish:
a. Whether a decision making authority exceeded its
powers?
b. Committed an error of law
c. Committed a breach of the rules of natural justice;
d. Reached a decision which no reasonable tribunal
would have reached; or
e. Abused its powers
These factors, sine quo non for maintaining writ
petition, are prima facie missing. It is well settled law that
judicial review of administrative decisions is limited to
examining whether decision making process is vitiated by
any illegality, procedural irregularity or perversity. This
Court does not sit in appeal over decision, so long as the
process leading to the same is found to be satisfactory
and free from any one of the infirmities.
d) In cases where decision making process involve technical
expertise, scope of review gets further reduced because
the courts are not equipped with expertise necessary to
sit in judgment over the decisions taken by experts. Even
otherwise, scope of judicial review in matters involving
challenge to tender condition is very limited. The nature of
scope of judicial review has been subject matter of long
list of decisions rendered by the Hon'ble Supreme Court
including in the case of Directorate of Education and
others v. Educomp Datamatics Ltd2and Master Marine
1
(1994) 6 SCC 651
2
(2004) 4 SCC 19
26
Services Pvt Ltd vs. Met Calfe & Hodgkinson (P) Ltd3.
It has been held in the various decisions that terms of
invitation of tender are not open to judicial scrutiny. The
Court would interfere with the administrative policy
decision only if it is arbitrary, discriminatory, mala fide or
actuated by bias. The Court cannot strike down the terms
of the tender prescribed by Government because it feels
that some other terms in the tender would have been fair,
wiser or logical. There is no res integra to the proposition
that scope of judicial scrutiny in government contract is
extremely limited. The parameters for determining the
infringement of Article 14 are confined to examining the
decision making process and not the decision itself. The
said decision making process can be interfered with only
in exceptional cases where the same is vitiated by
biasness, favouritism and the same is against public
interest. The judicial review cannot take away powers of
Government to accept or to reject any bid on the grounds
of public interest. The Government contracts are a matter
of the public policy and thus public interest is paramount
in such transaction rather than the commercial interests of
competitive bidders. The law relating to exercise of
judicial review coupled with judicial restraint in
Government contract has been extensively discussed in
various judgments by the Hon'ble Supreme Court of India.
The same very issue once again came up before the
Supreme Court in Air India Limited v. Cochin
International Airport Limited4.
e) Through the medium of instant writ petition, petitioners
have challenged communication by virtue of which tender
3
(2005) 6 SCC 138
4
(2000) 2 SCC 617
27
of Turnkey Execution of Pakal Dul (Drangdhuran) Hydro-
Electric Project has been cancelled and necessary
intimation with detailed reasoning has been given to
petitioners. Besides, this, petitioners have also challenged
fresh two NITs issued by respondents on such grounds
which, on the face of the same, are highly motivated and
do not at all advance the case of petitioners.
f) Respondent, being a joint venture of NHPC Limited, JK
State Power Development Corporation and PTC India
Limited, floated tender dated 19th June 2013 for Turnkey
execution of Pakal Dul (Drangdhuran) Hydroelectric
Project. Petitioner no.2 by forming Consortium agreement
dated 1st October 2013 with respondents 2&3 created
petitioner No.1 - Consortium, and applied for allotment of
contract. The bids quoted by petitioner No.1 through
evaluated to be lowest amongst all bidders, but were
found to be substantially higher than estimate costs
worked out by respondent on the basis of estimates by
Central Electricity Authority/sanctioned by the
Government of India.
g) After considering higher bid prices than estimated cost,
discussion/ negotiations were held with petitioner No.1 by
respondent with a view to seek clarification/justification on
the quoted bid prices through a Committee of officers duly
constituted by the Board of Directors of respondent. Even
in negotiation process, petitioner No.1 Consortium vide
letter dated 29th September 2014 offered various
discounts in bid prices. Despite negotiations on various
aspects and after taking into consideration discounts
offered by petitioner No.1 consortium, price bids
submitted by petitioner were not found feasible and
28
reasonable as such another High Level Committee
comprising of Directors of respondent was constituted but
again price bids were found to be substantially on a
higher side which has impact of causing loss to public
exchequer. Thereafter reports of two committees were
deliberated upon by Board of respondent and following
startling revelations came out:
(a) Even after discount offered by petitioner No.1
consortium, there was a gap of over Rs.300 Crore
between bid price and estimated costs and no further
discounts were offered by petitioner No.1 consortium;
(b) Work of consortium involves a number of items of
work, some of which are to be carried out during initial
stage of construction, viz. typographical survey,
development of tunnel portal, installation and
commissioning of TBM. However, it was found that
prices for these items on lump sum basis quoted by
petitioner No.1 consortium were exorbitantly high and
unjustifiable, thus, making price bid not only loaded,
but reducing requirement of mobilization advance to
that extent, which otherwise would have attracted
interest and submission of bank guarantee. Despite
petitioner No.1 consortium agreeing for removal/
flattening to some extent, there remains a front loading
to a large extent of about Rs.600 Crore.
(c) Petitioner No.1 consortium's act of keeping about
Rs.100 Crore, on account of planning, designing and
engineering work under Civil Works Component which
was found to be a serious issue as the PDE Consultant
will not have independence in the design and
engineering of the project. Overall price of civil works is
much higher as compared to other bidders. Further
29
above said bid structuring would put PDE Consultant
under undue control and influence of civil contractors
which has been found not to be in the interest of
project.
(d) Pakal Dul is a Turnkey contract involving various risks
but the way petitioner consortium has submitted price
bid most of the risk elements are hedged against
respondent. Further large front loading of Rs.600 Crore
as a part of strategy adopted by petitioner consortium
raises doubts about capability of petitioner consortium.
h) Keeping in view following serious factors:
(a) Substantially higher bid than the estimated cost of
work;
(b) The manner in which price bid has been structured
involving unbalanced distribution amongst various
work components;
(c) Large amount of front loading; and
(d) Hedging of risk against respondent;
are reasons which do not infuse confidence on
petitioner No.1 consortium for successful completion of
project works. Accordingly, respondent decided to
cancel present turnkey tender and necessary
intimation with all the concomitant reasoning and
justification in this behalf was given to petitioner
consortium by virtue of impugned communication
dated 16th February 2016 notwithstanding the fact as
per Article 1.2 of ITB, respondent was not obliged to
assign any reason for cancelling or withdrawing NIT.
For facility of ready reference Article 1.2 of tender
document reads as under:
30
―Owner reserves the right to itself to accept
any bid or to reject any or all bids or
cancel/withdraw invitation to Bids on the
ground of national security and any other
cause without assigning any reasons
thereof. Such decision by the owner shall
not be subject to question by any bidder
and the owner shall not bear any liability
whatsoever for such a decision‖.
In addition to this, the NIT Clause 13 clearly states
that ‗the owner shall have the right to reject all or any
bid and shall not be bound to accept the lowest or any
other bid or to give any reason for such decision.
i) After cancellation of turnkey tender, respondent has
floated two new tenders. Had petitioner no.2 been
genuine, it would have competed in the process of fresh
tendering. Instead of doing so, petitioner no.2 by arraying
a totally non-existent entity in view of Article 9 of the
Consortium Agreement i.e. petitioner No.1 Consortium
and without proper authorization from respondents 2&3
has filed instant writ petition for obvious mala fide
reasons.
j) Impugned communication of respondent in cancelling the
turnkey tender and floating new tenders is neither
arbitrary, nor discriminatory nor with mala fide intention
but said action has been taken purely in interest of public
because it involves huge public money. Further there is
no biasness or favouritism to any other party as the
instant contract has not been allotted to any other
tenderer who participated in tendering process. Thus, in
view of settled position of law, the said decision of
respondent which has been impugned instant writ
petition, not opens for judicial review.
31
k) The scope of judicial review in matters relating to award
of contracts by the State and its instrumentalities is
settled by a long line of decisions by the Hon'ble Supreme
court of India. The Supreme Court in Maa Binda Express
Carrier and another v. North-East Frontier Railway
and others5, has held that submission of a tender in
response to a notice, inviting such tenders is no more
than making an offer which the State or its agencies are
under no obligation to accept. The bidders participating in
tender process cannot, therefore, insist that their tenders
should be accepted simply because a given tender is
highest or lowest depending upon whether the contract is
for sale of public property or for execution of works on
behalf of the Government. All that participating bidders
are entitled to, is a fair, equal and non-discriminatory
treatment in the matter of evaluation of their tenders.
l) Without arraying the State of J&K as party respondent,
writ petition under Section 103 of the Constitution of
Jammu and Kashmir is not maintainable. Despite being
lowest tenderer, no right is vested in petitioner No.1
consortium to claim allotment of contract. It is submitted
that report of the Committee has been obtained by
petitioner in an unauthorised manner, which shows
intention of petitioner to resort to unfair means for
purpose of award of contract. The report of the committee
states that considering the prices quoted by bidder, the
total project cost shall be 16.5% above the updated
CCEA cost at Oct. 2013 Price level with inclusion of
excise, custom duty and BOCWC. The report of
committee was deliberated by Board of Director, and the
5
(2014) 3 SCC 760
32
Board, after detailed deliberations, decided to constitute
Directors level Committee to explore further scope of
reduction of cost. Directors Level Committee constituted
for BoD, held discussions with petitioner on 15th
December 2015 and 22nd December 2014 and after
considering earlier Committee report/recommendations
concluded that M/s DHPC is not ready to reduce prices
any further thus the unjustifiable/unjustified gap calculated
by earlier Committee as Rs.545.84 Crore remains as it is
and consortium has included some items as lump sum
items which have been quoted on much higher side
making the price bid front loaded.
m) As is evident and apparent from perusal of brief facts of
case as enumerated by petitioner No.1 consortium in writ
petition, it is nowhere remotely inferable that any mala
fide on part of respondent or its Directors. Despite being
lowest bidder, no right is vested with petitioner No.1
consortium to claim award of contract. Further respondent
has never communicated to petitioner No.1 consortium
that contract will be awarded to it. The plea of legitimate
expectation of petitioner in the present case is not
attracted.
n) Previous bidding process has no relevance with reference
to current position. Despite being lowest, price quoted in
the price bid by petitioner No.1 consortium was
exorbitantly higher than estimated cost worked out by
Central Electricity/Authority sanctioned by the
Government of India. Pendency of matter cannot be
attributed to respondent but it is petitioner No.1
consortium which kept altering price bids and the matter
remained pending scrutiny at different levels and finally
33
keeping in view the overall public interest and public
revenue, it was not found feasible by respondent to award
tender and respondent decided to go for re-inviting
tenders.
8. To respond to the Objections, filed by respondent No.1,
petitioner submitted Supplementary Affidavit on 28th
May 2016. It would be appropriate to have glimpse
thereof:
a) Respondent No.1 is an incorporated company under
Companies Act. It is a joint venture among NHPC Ltd, JK
SPDC, and PTC Ltd. NHPC Limited is a Government of
India Undertaking. JKSPDC is a company under
Companies Act and is fully owned by the Government of
Jammu and Kashmir. PTC India is a Government of India
undertaking.
b) The bids qua the project were invited by respondent No.1
on its own behalf and not on behalf of the Government of
Jammu and Kashmir or Union of India. The ultimate
contract was to be concluded with respondent No.1. In
that view of the matter respondent No.1 being agency/
instrument of the State. There are no private shareholders
in respondent No.1 nor are its shares listed in the Stock
Exchange. Under Article 226 of the Constitution read with
Section 103 of the Constitution of the State, with can be
issued against agency/instrument of the State.
c) After bids were invited by respondent No.1, three
companies joined hands and formed Consortium. A
formal agreement in this behalf was executed on October
34
1, 2013. The Consortium namely ―Drangdhuran Hydro
Power Consortium‖ comprises of:
i. Patel Engineering Limited, a company incorporated under
Indian Companies Act;
ii. Limak Insaat Sanayive Ticaret A.S. (Limak Construction
Industry and Trade Inc.), a company organized and existing
under the laws of the Republic of Turkey; and
iii. Bharat Heavy Electricals Ltd., a company incorporated under
Indian Companies Act, which is fully owned company by
Government of India.
d) The decision to file writ petition was taken by Consortium.
In terms of circular no.4/3/07 dated 03.03.2007 and office
order No.15/3/05 dated 24.03.2005, issued by Central
Vigilance Commission, the standard of decision is
required to be maintained by contract allotting authorities
while considering allotment or rejection of a contract.
e) The report submitted by Technical Experts has been
given a complete goby. The Committee, constituted to
hold discussions with petitioner consortium, comprised of
experts as would be evident from the report itself. The
subsequent committee constituted by Board of Directors
known as ―Directors Committee‖ comprised of four
Directors. Two members of the Expert Committee
recommended allotment of contract in favour of petitioner
consortium. The Board of Directors constituted another
committee called Directors Committee which held
discussion with representative of petitioner consortium.
The discussions were held in the month of December
2014 and thereafter no discussion were held at any stage
till impugned order was passed. All the six members of
the Expert Committee recommended allotment of contract
in favour of petitioner consortium. In the Directors
Committee, the representatives of the same organization
i.e. NHPC and JKSPDC opposed allotment of contract.
35
f) Petitioner consortium does not seek judicial scrutiny of
any condition of Invitation of Tender, in the present
proceedings. Petitioner consortium questions impugned
order on grounds sustainable in law at pre-contract stage.
g) Comparison of rates offered in a ―turnkey contract‖ with
estimate costs, where the rates are determined itemwise,
is irrational and arbitrary. The estimate prepared by CVPP
is based on itemwise, is irrational and arbitrary. The
estimate prepared by CVPP is based on ―item rate
contract model‖ and not based on ―turnkey model‖.
Reportedly CVPP had sent to CEA its estimates based on
―item rate contract‖ but issued NIT on ―turnkey basis‖.
h) Nothing has been stated in impugned order as to report of
Expert Committee. Impugned order does not show that
Expert Committee report was even seen, muchless
considered, by Directors Committee and Expert
Committee, which deliberated with petitioner consortium,
did not find any startling revelation.
i) The gap of over Rs.300 Crore is not because of the rate
offered by petitioner consortium but the gap is sought to
be stated on the basis of comparing incomparable
methodologies of evaluation. It is reiterated that ―itemwise
rates‖ and ―turnkey rates‖ can never be compared. At this
stage petitioner consortium submits that in the case of
―turnkey contracts‖ most of the risk are taken by
contractor during execution of work and/or thereafter
during ―defeat liability period‖. Any variation in quantities,
modifications of the design, geological occurrences etc.
are taken by contractor. In case of ―turnkey contract‖,
while as the price limit is fixed subject to plus 5%, any
variation in quantities does not entitle contractor to any
36
further payment. Such is not the position in the case of
item-wise contracts. In normal item rate contracts risks
pass on to contract allotting authority. Ultimately itemwise
contracts exceed value of turnkey contracts. Further in
estimates of CVPP expenditure required for electricity
consumption (construction power) is calculated on tariff
basis. In the case of petitioner consortium, since no such
power is available and it had to use DG Sets, the cost of
construction power comparatively would be higher than
the estimated cost. These aspects of the matter have
been noticed by Expert Committee but completely ignored
by Directors Committee. Non-consideration of such
elements in decision making clearly show arbitrariness.
These are some aspects which demonstrate irrational and
arbitrary rejection of the tender by respondents.
j) During course of negotiations petitioner consortium
agreed to ―linearization‖ of the lump sum amount quoted
by it. It is denied that post negotiation ―front loading‖
remained any controversial issue between parties.
Impugned order has completely ignored Expert
Committee report which takes care of alleged exorbitant
demand for ―front loading‖. Petitioner consortium had
further agreed that the amount payable would be
commensurate with progress of work. Respondent No.1
has totally confused payments, described by it as front
loading payments, with scale of work executed by
petitioner consortium. Petitioner consortium, unlike in the
case of itemwise work payments, was not entitled to
payments in consideration of the work done but in view of
the overall ceiling limit to enable contractor to execute
simultaneously several works of the project and to
maintain cash flow. Further during course of negotiation
37
petitioner consortium had guaranteed minimum Rs.275
Crores as ―interest‖ against advances. It is, therefore,
incorrect to state that requirement of consortium to avail
mobilization advance was reduced in any manner. Since
minimum interest was guaranteed on the advances,
therefore, it is but reasonable to say that consortium
would require advances. It is therefore, denied that there
remained front loading to large extent of about Rs.600
Crore.
k) Under the Bid documents, it was a requirement that
contractor would engage a planning, designing engineer
(PDE) Consultant as a sub contractor to main contractor.
In accordance with the said condition petitioner
consortium had indicated in its tender PDE Consultant
who would act as consultant. PDE Consultant was to be
paid by petitioner consortium. It is sheer perversity on part
of respondent to say that PDE Consultant would be under
control of consortium when Bid documents themselves
provide that contractor would engage PDE consultant as
sub-contractor. Most of the risk elements have been
taken by consortium. How and in what manner risk
elements have been ―hedged against the respondent‖ has
not been spelt out anywhere nor stated with clarity. The
Experts Committee examined each and every aspect of
tender documents in depth but they could nowhere find
that risk elements were ―hedged‖ against respondent
No.1. The statement is bereft of any merit. It is sheer
concoction. It is reiterated that the issue of front loading is
no longer an issue in view of linearization, guaranteed
payment of interest by petitioner consortium of Rs.275
Crore and gradual release of the payment. The allegation
of high front loading is preposterous. The capability of
38
consortium is established by the fact that one of the
companies in consortium is a Government of India
Undertaking and that respondent No.1 found, in Technical
Bid, petitioner consortium suitable and qualified for
executing the work.
9. Respondent No.1, filed Reply Affidavit in
opposition to Supplementary Affidavit of petitioner.
What has been contended therein, is worth to be
gone through hereunder.
a) Under the garb of supplementary affidavit, petitioners
have attempted to rebut objections/reply filed by
respondent No.1 to maintainability and admissibility of writ
petition. Through the medium of supplementary affidavit,
petitioners at the most can place on record additional
facts or documents but cannot be allowed or permitted to
rebut the objections/reply filed by respondent No.1
b) Through supplementary affidavit petitioners have
attempted to improve upon their glaring legal infirmities
and errors crept in writ petition, which has been filed by
petitioner no.2 without being properly authorised by other
two companies with whom petitioner no.2 had formed
petitioner No.1 consortium. Even authorisation provided
by M/s Patel Engineering Limited authorises Mr. Reshi
Kumar Sharma, to represent only company M/s Patel
Engineering Limited and the said authorisation does not
provide any power to Mr Reshi Kumar to represent M/s
Drangdhuran Hydro Power Consortium. After filing writ
petition and after earning interim directions, petitioner
39
no.2 appears to have approached proforma respondents
2&3, who in turn have given authorisations. Moreover M/s
BHEL - proforma respondent no.3 has given only Letter
of No Objection for continuance of said writ proceeding
carried out by petitioner No.1. As per documents placed
on record by petitioners, Executive Director/ General
Manager of M/s BHEL has no power to authorise M/s PEL
to file petition on behalf of M/s BHEL. Delegation of
powers by Board of Directors provides power to Executive
Directors to represent BHEL concerning the affairs of
company in any court and/or quasi-judicial authority. As
per records placed in supplementary affidavit, petitioner
no.2 has not been authorised by M/s BHEL to represent
M/s DHPC/ M/s BHEL in the matter. Even these
authorisations are admittedly given after filing of writ
petition. If proforma respondents 2&3 intend to join hands
with petitioner no.2 to authorise petitioner No.1
consortium to plead their case, then they are required to
withdraw instant writ petition and file afresh writ petition.
c) Writ petition is a unique writ petition, first of its kind, where
petitioner No.1 consortium of three companies has not
been authorised by two companies to file writ petition.
Petitioner no.2 - Patel Engineering Limited, without any
proper authority from other two companies filed instant
writ petition by arraying Drangdhuran Hydro Power
Consortium as petitioner No.1 and putting other two
companies in the array of respondents. After, this Court
entertain writ petition and passed interim order, petitioner
no.2 managed and manoeuvred with other two
companies to give their consent/authorisation for instant
litigation. Since with issuance of authorisation by
aforesaid two companies, entire scenario of writ
40
proceedings in has changed, therefore, no proceedings in
writ petition can be conducted. Under the given peculiar
facts and circumstances of the case, present writ petition
is liable to be dismissed, being highly defective on
account of mis-joinder/non-joinder of proper parties and
petitioners are liable to file fresh writ petition.
d) PTC India Limited is not a Government of India
Undertaking. Respondent No.1 is a joint venture of
NHPC, JKSPDC and PTC, and NHPC and PTC have
public and financial institution's shareholding and are
listed companies in the Stock Exchange. On one hand
petitioners state that bids in respect of the project were
invited by respondent No.1 on its own behalf and not on
behalf of Government of Jammu and Kashmir or Union of
India and on other hand, have stated that respondent
No.1 being agency/instrument of State. Respondent No.1
is admittedly a Company incorporated under Companies
Act, but same under law is not amenable to writ
jurisdiction of this Court as it is not the ―State‖ as per
Article 12, Constitution of India.
e) Article 8 of Consortium Agreement relates to obligations
under the Contract and it is not applicable in present
circumstances as no contract has been entered into with
petitioner No.1 consortium. It is highly and ex facie wrong
on part of petitioners to state that the decision to file
petition was taken by consortium. Authorisations placed
on record by petitioners are post facto and are aimed at
changing basic architecture of writ proceedings. As per
Article 9 of Consortium Agreement, petitioner No.1
consortium consisting of petitioner and proforma
respondents 2&3 comes to an end on issue of Letter of
41
Cancellation dated 16th February 2016 and Expiry of Bid
Validity on 31st March 2016. This goes to the root of the
case that after 16th February 2016 or even after 31st
March 2016, petitioner No.1 is a defunct Entity and does
not have any power or authority. The plea taken by
petitioners that petitioner No.1 consortium continues to
exist as M/s BHEL and M/s LIMAK, consortium partners,
have contested the order of rejection, is not as per
consortium agreement.
f) Petitioners throughout their highly defective petition have
prima facie failed to substantiate any ground. Detailed
reasons for cancellation have been communicated to
petitioner vide letter dated 16th February 2016, which
completely demolishes allegations of petitioners.
Petitioner No.1 was given enough opportunity as seven
meetings were held by two Committees constituted by
Board of Directors to hold discussions with LI bidder.
g) Petitioners have adopted a conspicuous silence as
regards law relating to exercise of judicial review coupled
with judicial restraint in government contract. Their silence
is thus required to be treated as admission on their part.
After evaluation of Price Bid, Tender Evaluation
Committee recommended that lowest evaluated bidder
i.e. petitioner No.1 be invited for negotiation to justify and
reduce his prices/rates for different components of work
to bring them to a reasonable level with respect to
estimated cost and to seek clarification on other points.
Respondent No.1 had sufficient grounds to hold
negotiations with LI bidder. Therefore, after approval of
Board of Directors, L1 Bidder was invited vide letter dated
42
5th May 2014 for discussions and to justify prices/rated
quoted.
h) There was no Administrative Officer in Directors
Committee. The Directors Committee comprised of four
Directors, out of which three were Technical members
and one was Finance member. It was a higher level
committee as compared to first Discussion Committee
constituted by Board (now being projected as ―Expert
Committee‖ by petitioner in order to mislead the Court.
Directors' experience and expertise on Technical and
Financial angle regarding evaluation of Bids was more as
compared to earlier constituted Discussion Committee.
i) For higher cost, front loading and wrong structuring of the
bid, petitioner has tried to attribute it to Turnkey contract,
which is totally misleading, baseless and mischievous,
hence denied. The reasoning projected by petitioner
relating to deviation and modification of bid does not
assist case of petitioner and also does not restrain power
of respondent to accept or reject any bid and further call
for retendering or rebidding in large public interest.
Petitioner's statement ―Ultimately item wise contracts
exceed the value of turnkey contracts‖ is emphatically
denied as upward/downward variation of quantities of
work at the time of detailed designing/execution of works
cannot be predicted at the tendering stage. Under the
tender conditions, there is no restriction for use of grid
power by contractor and contractor is at liberty to make
suitable arrangements for use of grid power. It cannot be
said that contractor shall be dependent on DG power
only.
43
j) Petitioner has tried to take undue advantage of bidding
process by way of trying to draw huge payments in initial
stages of work without committing commensurate works
on ground and thereby, in effect, taking advances from
respondent without any interest liability thereof and
without need to provide appropriate bank guarantees
against such amount. The argument regarding offer of
minimum interest guarantee is misleading as by taking
additional advances, which shall be interest bearing, no
favour is being extended to respondent. Payment of
interest of advances is in no way an advantage being
granted to respondent by petitioner. Respondent's
objection has been on misuse of bidding process by way
of introduction of certain items at the price bid stage
(which were not part of technical submission - stage I bid)
which were highly quoted and were to be executed during
initial stages of the contract, which resulted in front
loading of the bid.
k) Planning, Design and Engineering works is responsibility
of PDE contractor, but petitioner in reply to a query, has
revealed that a provision of Rs.100.28 Crore has been
kept under Civil Works component on account of
Planning, Design and Engineering works. This kind of
structuring of bid may jeopardise timely payments to PDE
subcontractor. Also through BoQ of civil works, it cannot
be deduced at what stage(s) this payment of Rs.100.28
Crore is being drawn by civil contractor. Similar cross
costing has been resorted to between work groups of Civil
Works and E&M Works, wherein payment related to E&M
Works have been charged under Civil Works, thereby
trying to avail contingency provision for amount, which
was not due.
44
l) Petitioner No.1 has structured his bid in such a way that
payments drawn by him in initial stages are much in
excess compared to actual work executed on ground
during that period. Respondent No.1 apprehended great
risk in contract execution under such type of bid
structuring wherein contractor would draw substantial
payment before starting major activities on ground. The
Board while considering the matter reviewed all reports
but did not find it appropriate to approve award of works
to petitioner. Recommendations of Committees are not
binding on Board and Board of Directors is final authority
to take decision in the matter.
m) Petitioner No.1 was qualified in Technical Bid stage
based on submissions including unpriced Bill of
Quantities. Petitioner made substantial changes in
submission of Bill of Quantities at the stage of submission
of Price Bid. Such changes are alteration in terms, under
which petitioner was technically qualified. Also during
discussions with Directors' Committee, petitioner was not
ready to delete the new items introduced during price bid
stage, which resulted in front loading of the bid.
n) As one of the two new tenders is for inviting bids on
EPC/Turnkey basis, petitioner and proforma respondents
are at liberty to participate in fresh bidding process and
moreover petitioner No.1 has purchased tender
documents in respect of fresh NITs published.
10. I have heard learned counsel for the parties at length.
I have gone through the record produced by
45
respondent CVPP. I have given my thoughtful
consideration to the case.
11. Mr Z. A. Shah, learned senior counsel appearing for
petitioners, in support of his arguments advanced, has
submitted ―Written Submissions‖. So has been filed by Mr
Sunil Sethi, senior counsel appearing for respondent
No.1. In Written Submissions filed by petitioners, learned
senior counsel has given certain Issues/Points, to be
settled vis-à-vis the subject-matter of writ petition. The
said Issues/Points are:
i) Cause of action must be antecedent to the filing of Lis in
Court.
ii) Whether respondent No.1, a company incorporated
under Companies Act, 1956 is amenable to writ
jurisdiction of this Court?
iii) Whether State of Jammu and Kashmir is a necessary
party in the writ petition?
iv) Whether writ petition is maintainable by the lead partner
without other members of the Consortium having joined
as writ petitioners?
v) Whether the Consortium has come to an end?
vi) Whether the tender submitted by the Consortium
continues to be valid?
vii) Grounds for showing that impugned decision dated
16.02.2016 is bad in law.
viii) Analysing the impugned order dated 16.02.2016.
ix) What is the scope of judicial review in contractual
matters?
x) What is arbitrary?
xi) What is reasonable?
xii) What is meant by public interest?
xiii) Whether respondent No.1 has violated doctrine of
legitimate expectation?
xiv) Power of the court to review decision of respondent
No.1 on facts?
xv) Whether respondent No.1 has absolute power to reject
tender in terms of Article 1.2 of ITB, relied upon in the
order of rejection dated 16.02.20-16?
xvi) Cost of rebidding.
46
12. Though various issues/points have been raised by
learned senior counsel for petitioner, yet it would be
appropriate to narrow down the same in following issues:
a) Whether respondent No.1 is amenable to writ
jurisdiction of this Court?
b) Whether impugned decision of respondent
CVPP, cancelling "turnkey tender" as also
petitioner's bid, and issuing fresh tender notices
on "package mode", is arbitrary and
unreasonable?
13. Let's take the first issue for discussion and
settlement. The first issue is ―Whether respondent
No.1 is amenable to writ jurisdiction of this Court?‖
14. Learned senior counsel appearing for respondent No.1
has submitted that respondent No.1 CVPP has been
constituted by virtue of Articles of Association between
NHPC, JKSPDC and PTC India Limited and as per the
Articles of Association, all the three constituents have
contributed finances for respondent No.1 CVPP, for
earning returns on their investments. Though the joint
venture is amongst the Government of India Undertaking
(NHPC) and State Government Undertaking (JKSPDC)
and PTC India Limited, but merely because the money
contributions are majorly coming from Government will
47
not make respondent No.1 CVPP a State for the reasons:
that the money is contributed by the Government of
India/State Government by way of investments and not by
way of expenditure and this investment by the
Government of India/State Government is for the purpose
of earning returns for the same; that because of
contribution of money by the constituents, they have been
given the authority to nominate the Directors of
respondent No.1 CVPP, but the authority of
administration lies exclusively with respondent No.1
CVPP itself, and to that extent there is no governmental
interference in day to day working or policy decisions of
respondent No.1 CVPP; that the policy decision of
Government, which are binding upon respondent No.1
are only legislative powers of the Government, which are
applicable to any private venture as well, but there is no
administrative monopoly or interference by the
Government in the working of respondent CVPP; that
respondent CVPP's Directors, including Managing
Director, are empowered to take decisions independently
and they do not have to seek permission from the
Government before taking a decision; that respondent
CVPP is master of its accounts; that through the
Government has got the power to withdraw or transfer
48
Directors from the Board of respondent CVPP but it does
not have the power to direct nominated directors to act in
a particular way and/or to take a particular decision.
15. On the other hand, learned senior counsel for petitioner
has submitted that in terms of Articles of Association,
prior to formation of the company under Companies Act,
1956, ―PTC India Ltd‖, ―NHPC Ltd‖, ―JK State Power
Development Corporation‖ and ―Government of Jammu
and Kashmir‖ had executed an agreement called
―Promoters Agreement‖ dated 21st December 2010, which
is expressly made in Articles of Association. According to
Clause 7 of Articles of Association, the payment of
shareholding of the issued share capital of CVPP is 49%
of paid up share capital of CVPP is made by NHPC, 49%
by JKSPDC and 2% by PTC. NHPC is a Government of
India Undertaking and 86% of the shares in the said
company are held by Government of India and that writ
petition against NHPC is maintainable and the said
company is amenable to writ jurisdiction of this Court.
JKSPDC is also a company incorporated under
Companies Act, which is fully owned by the Government
of Jammu and Kashmir and is not a listed company. Qua
PTC (Power Trading Corporation), it is also a company
incorporated under Act.
49
16. While relying on various decisions of the Apex Court, to
be discussed below, learned senior counsel for petitioner
submits that the Supreme Court has laid down following
parameters or guidelines for identifying ―other authorities‖
in Article 12, which are:
a) If the entire share capital of the corporation is held by
government it would go a long way towards indicating
that the corporation is an instrumentality or agency of
the government.
b) Where the financial assistance of the State is so much
as to make almost entire expenditure of the
corporation, it would assume indication of the
corporation being impregnated with governmental
character.
c) It may also be a relevant factor whether the
Corporation enjoys monopoly status which is State
conferred or State protected.
d) Existence of deep and pervasive State control may
afford an indication that the Corporation is an agency
or instrumentality.
e) If the functions of the corporation are of public
importance and closely related government functions it
50
would be a relevant factor in classifying the corporation
as an instrumentality or agency of the Government.
f) Specifically, if a department of government is
transferred to a Corporation it would be a strong factor
supportive of the inference of the Corporation being an
instrumentality or agency of Government.
17. Learned senior counsel for petitioner has also mentioned
that the Supreme Court has ruled that when the body is
―financially‖, ―functionally‖ and ―administratively‖
dominated by or under the control of the Government and
such control is brought to the body and is pervasive, then
it is a State within Article 12 and that the real test to
consider the status of the body is to see how far it is
controlled by the Government and not forms in which the
body is constituted. Learned counsel further submits that
respondent No.1 is an ―agency of the State‖ on the
following grounds:
i. 49% shares are held by NHPC and 49% by JKSPDC.
2% are held by PTC. Both NHPC and JKSPDC are
Government owned and controlled companies.
ii. The basis of incorporation of respondent No.1 (CVPP)
is the agreement dated 21st December 2012 between
PTC, NHPC Limited, JKSPDC and Government of
51
Jammu and Kashmir. The company has its original in
the decision of NHPC Limited, a Government of India
Undertaking and Government of Jammu and Kashmir.
iii. Under Clause 5(b) of the Articles of Association
invitation to the public to subscribe for any shares or
debentures is prohibited. Similarly, acceptance of
deposits from persons other than members is
prohibited. The right of transfer of shares is prohibited.
Under Clause 5 (c) the ratio between JKSPDC, NHPC
and PTD of 49:49:2 is to be maintained at all times.
Under Clause 7 the authorised share capital has to be
subscribed only by NHPC, JKSPDC and PTD.
Subscription by NHPC and JKSPDC are clearly
subscriptions by these fully owned Government
companies. Under Clause 35, if shares become
available as a result of increase in capital, they are to
be shared in accordance with Article 7. Under Clause
55, the company is to have not less than four but not
more than fourteen Directors. The Directors are not to
hold any qualification share. Under Clause 55 (iii) the
Board of Directors has to have equal representation
from NHPC and JKSPDC. PTC is not to be
represented on the Board of Directors. The Directors
have been nominated, two in number by JKSPDC and
52
two by NHPC Limited. Under Clause 56 Chairman of
Board is to be appointed by JKSPDC in consultation
with NHPC. Under Clause 57, the nominees of NHPC,
JKSPDC can hold office of the Directors in the
company ―at the pleasure of respective appointing
authority‖, who have the power to remove their
nominees on the Board. Under Clause 60, a Director
representing JKSDC or NHPC will cease to be a
Director if he ceases to be an official or nominee of
JKSPDC or NHPC. Under Clause 72, the Board of
Directors have the power to make, vary and repeal by-
laws etc. Under Clause 73 (b) in respect of matters
mentioned therein, the Board is not competent to take
decision unless NHPC and JKSPDC separately
approve the decisions. Under Clause 84 post of
Managing Director and Joint Managing Director can
only be held by nominees of NHPC and JKSPDC.
Under Clause 101 the Government of Jammu and
Kashmir is to get 12% free power generated from the
project. Additional 1% free power for local area
development fund is also to be provided by CVPP. Out
of the balance 87% power the Government of Jammu
and Kashmir has the right to purchase power from
CVPP in proportion to the share of JKSPDC. The
53
remaining power can be sold by NHPC and PTC in
proportion to their paid up equity share capital. The
Jammu and Kashmir Power Development Department
has the first right of refusal. Under clause 106, the
Government of Jammu and Kashmir is to provide staff
on deputation to enable the company to carry out its
task. 80% of group C&D staff in the company have to
be permanent residents of the State. Clause 107 clines
the issue when it says that ―notwithstanding anything
contained in these articles, the directives issued by the
President to NHPC/Government of Jammu and
Kashmir to JVC will be applicable to the company for
the conduct of its business. The Directors shall give
immediate effect to the directives or instructions so
issued‖. Under Clause 113 the company is to adopt
Promoters Agreement which is between NHPC
Limited, JKSPDC, PTC and Government of Jammu
and Kashmir dated 21st December 2010 and
Memorandum of Understanding dated 10th October
2008. Therefore, respondent CVPP is clearly an
―agency‖ of the ―State‖. All its major substantive
functions are controlled not only by NHPC Limited and
JKSPDC, both being ―State‖ under Article 12, but
respective Central and State Government. The
54
financial, functional and administrative control of the
State Government is deep and pervasive.
iv. There is direct nexus between respective executive
governments and respondent No.1, which is
substantiated by Clause 107. All the directions issued
by President of India and Government of Jammu and
Kashmir are binding on CVPP. In respect of major
decisions, CVPP is not competent to deal with them
but a separate approval is required from NHPC and
JKSPDC. The funding is provided by respective
governments through their own companies. The Board
of Directors comprise of nominees made of the State
Government and Central Government through their
companies. The Directors can hold office only till the
time they hold their office in the State/Central
Government.
v. Under Constitution of India, both Parliament and State
Legislatures have power to enact laws. Entry 38 in
Concurrent List relates to ―electricity‖. Legislature of
the State of Jammu and Kashmir has, therefore, full
powers to enact laws relating to electricity. Accordingly
various legislations have been passed. Sections 2(3),
3, 7, 8, 10, 24 and 28 of the Electricity Act, 2010,
55
demonstrate control of the State on generation of
electric power. Since the State of Jammu and Kashmir
has power to deal exclusively with electricity, the State
Government has notified ―Hydro Electric Projects
Development Policy - 2011‖ vide Government Order
No.205-PDD of 2011 dated 7th July 2011. In terms of
the Preamble of the Policy it has been notified that the
State intends to accelerate harnessing hydro power as
an integral part for economic development. According
to the State, it will bring in huge economic benefits in
the form of infrastructure development, industrialization
and employment generation. The policy is aimed at
using electrical energy as an article of export. In the
Policy of the State itself, has given sector-wise
breakup of harnessing Hydro potential. In category-C,
―projects planned for execution‖ of the policy at serial
no.3, 1000 MW Pakaldul has been mentioned as ―Joint
Venture‖. The policy says that JKSPDC was carved
out of Jammu and Kashmir Power Development
Department in 1989 and incorporated as a company in
1995 with the mandate to plan, execute, operate and
maintain all Generating Stations including such
stations that existed at the time of creation of the
Corporation. It also provides that installation capacity
56
of the projects under operation with NHPC is 1680
MW. The policy also states that in 2008 the State
Government vide Order No.168-PDD of 2008 dated
25th April 2008 has approved implementation of Hydro
Electric Projects, among others, by means of Joint
Venture of JKSPDC with Central Power Sector
Undertakings. Under the policy, JKSPDC has been
made as a nodal agency and for developing the
potential of hydro power in the State and for this
purpose the State can use any of the modes as
provided in the policy. The State Government has
accordingly formed CVPP with NHPC. The company is
to carry out the policy of the State Government with
regard to power generation. CVPP, therefore, is not an
independent power producer but is a part of the State's
policy. Big projects (like the one subject matter of writ
petition) are handled by the State Government itself
through JKSPDC.
vi. CVPP is intended to implement Government policy. Its
functions are ―public functions‖ as the Government by
implementation of policy is to achieve following
objectives among others:
i) Maximization of benefits to the State by meeting its
power requirement.
57
j) Provide employment opportunities to people of the
State.
These are clearly public functions.
18. As regards ―public function‖, while relying on decision of
the Supreme Court in (2013) 6 SCC 452, learned counsel
made mention of following factors:
i) The extent to which the State has assumed
responsibility for the function in question;
ii) The rule and responsibility of the State in relation to
the subject matter in question;
iii) The nature and extent of the public interest in the
function in question;
iv) The nature and extent of any statutory power or
duty in relation to the function in question;
v) The extent to which the State directly or indirectly
regulates, supervisees or instructs the
performance of the function in question;
vi) The extent to which the State makes payment for
the function in question;
vii)Whether the function involves or may involve the
use of statutory coercive powers;
viii) The extent of the risk that improper performance
of the function might violate and independent
convention right.
The Apex Court concluded these observations
making it abundantly clear that any order for it to be
held that the body is performing public function, the
appellant would have to prove that the body seeks to
58
achieve some collective benefit for the public or
section of public and accepted by public as having
authority to do so. A ―public authority‖ is a body which
has statutory duties to perform and which performs
these duties and carries out its transaction for the
benefit of the public and not for private profit. It was
held that State is abstract entity. Therefore, the State
acts through its agencies or instrumentalities of the
State.
19. Learned senior counsel for petitioner, in response to the
submission of respondent No.1 that it (respondent No.1)
is a private company; there is no role of Government in
CVPP; and CVPP is not a Government controlled
company, has submitted, and rightly so, that all
companies, so long as public at large do not hold shares
in that company, but by declaring a company as a private
company, it does not lead to the conclusion that whatever
profits are generated by that company it goes to the
personal pocket of the shareholders and that there are no
―individuals‖ as shareholders in the company. He has
further submitted JKSPDC is a State Government owned
company and NHPC is a Central Government owned
company, and any profit which the company may make,
will be shared by the Government and not by individuals.
59
Therefore, to say that CVPP is a private company,
leading to the inference that it has nothing to do with the
government, is a misleading argument.
20. Further submission of learned senior counsel for
petitioner is that shareholding by governments or by
government undertakings is one of the parameters of
ascertaining character of a company. It shows that
funding of the company is done by the Governments and
it means that the funding is not made by private
individuals. The funding made by the Government, being
the shareholder, indicate the source of finances. The
shareholding and percentage of share is an important
factor in ascertaining the nature of a company. Greater
the share of the Government, more concern the
Government will have about the company. The
Governments, by investing in the companies, do not leave
the companies free to deal with the finances in the
manner company chooses. In the present case, as rightly
pointed out by learned senior counsel for petitioner, the
finances are made available by the Government and the
Government controls the finances by nominating its
Directors on the company through their undertakings.
Thus on the one hand the Government finances an
incorporated company and on the other hand controls its
60
affairs. There is direct link between Board of Directors
and finances. In CVPP all members of the Board of
Directors are nominees of NHPC Limited and JKSPDC.
There is, thus, complete control of Government in the
affairs of CVPP. The shareholding of PTC is hardly 2%.
Learned senior counsel further avers that there is no law
laid down by the Supreme Court that a company,
incorporated under Companies Act, can never be a State
within the meaning of Article 12. In fact the law is that
companies, incorporated under Companies Act, qualify as
an ―agency‖ of the State if they satisfy the tests laid down
by the Apex Court. The Constitutional Bench decision of
the Supreme Court reported in (2002) 5 SCC 111,
according to learned senior counsel, clearly lays down the
test for ascertaining character of a company and the
question as to whether CVPP is a State or not has to be
answered on the touchstone of the law laid down by the
Apex Court in the said decision and that the functions of
CVPP are patently public functions. Huge projects cannot
be equated with small hydro projects of 02 MW or 100
MW. In terms of the policy, big projects, like the instant
one, have to be executed in ―joint venture‖ and therefore,
CVPP satisfies other conditions as well. His further
contention is that reliance placed on a decision reported
61
in (2006) 1 SLJ 1, by learned senior counsel appearing
for respondent No.1, is not applicable to present case
inasmuch as in the said case the Court found that 54%
shares had been held by Government and 47% shares
were held by public at large and the Court after
considering the Articles of Association of the Bank,
arrived at conclusion that the Government was not
exercising any dominant control on the bank. And the
Court also ruled that in the event any public duty is not
performed by the bank as enjoined on it under law, a writ
petition would be competent. Learned senior counsel for
petitioner further contends that to ascertain whether an
incorporated company is an agency of the State within
meaning of Article 12 of the Constitution, has to be
decided in light of Memorandum and Articles of
Association, leading to the conclusion whether
governmental control is deep and pervasive in
administration, functionality and in fairness and it is
submitted by learned counsel that respondent CVPP
qualifies as a ―State‖ within meaning of Article 12 of the
Constitution.
21. Learned senior counsel for petitioner, on the issue of not
arraying State as party respondent in writ petition, has
that the State of Jammu and Kashmir is not a necessary
62
party for the reason that no cause of action has accrued
to petitioners against Government of Jammu and Kashmir
or Government of India and that the law recognises only
two types of parties, they are, either ―necessary parties‖
or ―proper parties‖; there is a clear distinction between
two groups; a party is a necessary party if the court at the
end of proceedings is unable to give any relief to
petitioner because of absence of necessary party. In a
case a ―party‖ is a ―proper party‖, if court finds the
presence of party is necessary for adjudication of the
matters in controversy and that respondents do not say
whether State of Jammu and Kashmir is a ―necessary
party‖ or ―proper party‖. According to learned senior
counsel for petitioner, there are several decisions
delivered by Apex Court, laying down tests for
determining whether a particular party is a ―necessary
party‖ or a ―proper party‖. These decisions, according to
him, have been delivered in AIR 1963 SC 786, (1992) 2
SCC 524, (1995) 2 SCC 326 and (1996) 5 SCC 539, and
that all these decisions of the Apex Court lay down the
test as to whether a particular party is a ―necessary party‖
or a ―proper party‖. He further states that since no action
of the State is called in question, therefore, the State of
Jammu and Kashmir is not a necessary party in the
63
proceedings. Respondent CVPP, as stated by learned
senior counsel, qualifies as a State within meaning of
Article 12. While relying on judgements report in (2003) 6
SCC page 1 and (2001) 7 SCC page 1, it is stated that
action of respondent CVPP, for purposes of law, being
the action of the State, there is no requirement of arraying
the State of Jammu and Kashmir as a party to the
proceedings. There is no distinction between CVPP, as
an ―agency‖ of the State and the ―State‖. For purposes of
Article 12, the State is not distinct from the body, the
State has crated (incorporated a company) and in fact
respondent CVPP itself represents the State and that
respondent CVPP, as an incorporated company, on the
one hand, has its own distinct personality but on the other
hand when the incorporated veil is lifted respondent
CVPP represents the Government. Therefore, the law
treats action of respondent CVPP as ―State action‖ and
not a distinct action of an incorporated body, and
therefore, State of Jammu and Kashmir is neither a
proper nor a necessary party. Learned senior counsel
further submits that respondent CVPP's contention is that
ultimate effect of the judgment is on the State and the
State of Jammu and Kashmir is, thus, a necessary party
and respondent for that purpose has placed reliance on
64
decisions reported in (1976) 1 SCC 481 and (2003) ACR
294. To this learned senior counsel states that contention
of respondent CVPP is misconceived inasmuch as the
reliance place on judgment relates to a case where
damages were sought from Railways and Union of India
had not been made party to the case. In the said case,
the Apex Court ruled that Union of India is a necessary
party because the amount claimed by claimant in that
case was ultimately payable by Union of India. It is
submitted that that the said case has no bearing on the
issue involved. The Supreme Court of India in a decision
in (1977) 1 SCC 484 has ruled that department of
railways does not have an independent statutory status
but it represents Union of India and having regard to the
said decision it is submitted by learned senior counsel
that in the judgment cited by respondent CVPP, the
Supreme Court had taken the same view that Railways
represents Union of India and does not have any
independent status, statutory or otherwise and therefore,
Union of India, was a necessary party. Insofar as matter
under consideration is concerned, according to senior
counsel respondent CVPP is a company under
Companies Act and therefore, is a legal entity. It can sue
65
or be sued in its own name and the position of CVPP is
not like that of Railways.
22. Before adverting to the core issues at some length,
let's take a look at Article 12, the Constitution of India.
It reads:
"12. In this part, unless the context otherwise requires, "the
State" includes the Government and Parliament of India and
the Government and the Legislature of each of the States
and all local or other authorities within the territory of India or
under the control of the Government of India."
23. Article 12, the Constitution of India, does not define the
word 'State'. It is merely an inclusive definition. It includes
all other authorities within the territory of India or under
the control of the Government of India. It does not say
that such other authorities must be under the control of
the Government of India. The word 'or' is disjunctive and
not conjunctive. The expression "authority" has a definite
connotation. It has different dimensions and, thus, must
receive a liberal interpretation. What is necessary, is to
notice functions of the ‗body' concerned. A ‗State' has
different meaning in different contexts. In a traditional
sense, it can be a body politic, but in modern international
practice, a State is an organisation, which receives
general recognition, accorded to it by existing group of
other States. The expression "other authorities" in Article
12, the Constitution of India, is 'State' within territory of
66
India as contradistinguished from a State within control of
Government of India. The concept of ‗State' under Article
12, is in relation to fundamental rights guaranteed by
Part-III of the Constitution and Directive Principles of the
State Policy contained in Part-IV thereof. The contents of
these two parts manifest that Article 12, is not confined to
its ordinary or constitutional sense of an independent or
sovereign meaning, so as to include within its fold
whatever comes within purview thereof, so as to instil
public confidence in it.
24. The State undertakes commercial functions in
combination with Governmental functions in a welfare
State. Governmental function must be authoritative. It
must be able to impose decision by or under law with
authority. The element of authority is of a binding
character. The rules and regulations are authoritative
because these rules and regulations direct and control not
only exercise of powers by companies, corporations and
bodies, but also all persons, who deal with these bodies.
In Rajasthan State Electricity Board, Jaipur v. Mohan
& Ors.6, the Supreme Court said that an "authority‖ is a
public administrative agency or corporation having quasi-
governmental powers and authorised to administer a
6
(1967) 3 S.C.A. 377
67
revenue-producing public enterprise. The expression
"other authorities" in Article 12 has been held by the
Supreme Court in the said case (Rajasthan Electricity
Board) to be wide enough to include within it, every
authority created by a statute and functioning within
territory of India, or under control of the Government of
India. The Supreme Court, while referring to earlier
decisions, further said that the expression "Other
authorities" in Article 12, will include all constitutional or
statutory authorities on whom powers are conferred by
law. The State itself is envisaged under Article 298 as
having the right to carry on trade and business. The State
as defined in Article 12 is comprehended to include
bodies created for purpose of promoting economic
interests of people. The circumstance that statutory body
is required to carry on some activities of the nature of
trade or commerce does not indicate that the ‗body' must
be excluded from the scope of word "State." The
concurring judgment in Rajasthan Electricity Board case
(supra) provide that the Board was invested by statute
with extensive powers of control over electricity
undertakings.
25. A public authority is a body which has public or statutory
duties to perform and which performs those duties and
68
carries out its transactions for the benefit of the public and
not for private profit. Such an authority is not precluded
from making a profit for the public benefit. Regard being
had from Halsbury's Laws of England 3rd. Ed. Vol. 30
paragraph 1317 at p.682. The feature that the CVPP has
been allowed to exercise the powers enabling it to
trespass across the fundamental rights of a citizen is of
great significance. In terms of the Memorandum of
Association, CVPP is to acquire and require land for
constructing Power Stations. It is in need of water of the
State to generate power, obviously, for benefit of the
public.
26. In Sukhdev Singh v. Bhagat Ram7, Mathew, J. stated
that even big industrial houses and big trade unions
would come in the purview of ‗State'. While doing so, the
courts did not lose sight of difference between the State
activity and individual activity. The Supreme Court took
into consideration the fact that new rights in citizens have
been created and if any such right is violated, they must
have access to justice, which is a human right. There is
an ongoing effect of globalization and/or opening up of
markets by reason of liberalization policy of the
Government. "Other authorities", among others, would be
7
(1975) 1 SCC 421
69
there, which, inter alia, function within territory of India/
State and the same need not necessarily be the
Government of India, the Parliament of India, the
Government of each of the States, which constitute the
Union of India or the legislation of the States. Article
12 must receive a purposive interpretation, as by reason
of Part III of the Constitution a charter of liberties against
oppression and arbitrariness of all kinds of repositories of
power, have been conferred the object being to limit and
control power wherever it is found. A ‗body', exercising
significant functions of ―public importance‖, would be an
authority in respect of these functions. In those respects it
would be same as is executive government, established
under the Constitution and the establishments of
organizations funded or controlled by the Government.
27. The development of law in this field is well-known. At one
point of time, companies, societies, etcetera, registered
under Indian Companies Act and Societies Registration
Act, were treated as separate corporate entities, being
governed by its own rules and regulations and, therefore,
held not to be 'States', albeit they were virtually running
as departments of Government. However, situation has
completely changed. The ‗statutory authorities' and ‗local
bodies' were held to be ‗States' inRajasthan State
70
Electricity Board, Jaipur case (supra). The courts,
however, did not stop there and newer and newer
principles were evolved, as a result whereof different
categories of ‗bodies' came to be held as ‗State'.
28. Mathew, J. in his concurring, but separate judgment,
raised a question as to for whose benefit the Corporations
were carrying on the business and in answering the
same, came to the conclusion that respondents therein
were 'States' within meaning of Article 12, the Constitution
of India. It was observed that even big companies and
trade unions would answer the said description as they
exercise enormous powers. Same is true about the case
in hand. Respondent CVPP has been given enormous
powers to use and utilise the resources of the J&K State.
Respondent CVPP is to generate and supply power,
which per se is an enormous task and authority. The
activities that are attributed to respondent CVPP and the
benefits derived therefrom, are not for individual(s), but
for public.
29. In UP State Cooperative Land Development Bank Ltd.
v. Chandra Bhan Dubey & Ors.8, the land development
bank was held to be a State. The Supreme Court, upon
8
AIR 1999 SC 753
71
analysing various provisions of Act and the rules framed
thereunder, observed:
"It is not necessary for us to quote various other sections
and rules but all these provisions unmistakably show that the
affairs of the appellant are controlled by the State
Government though it functions as a cooperative society and
it is certainly an extended arm of the State and thus an
instrumentality of the State or authority as mentioned
under Article 12 of the Constitution."
Insofar as the case in hand is concerned,
respondent CVPP has been given the authority of
generating and supplying the power of the State. The
activities of respondent CVPP are not less than a ‗State'
itself.
30. Madon, J. in Central Inland Water Transport
Corporation Limited and Another Vs. Brojo Nath
Ganguly and Another9 questioned : -
"Should then our courts not advance with the times? Should
they still continue to cling to outmoded concepts and
outworn ideologies? Should we not adjust our thinking caps
to match the fashion of the day? Should all jurisprudential
development pass us by, leaving us floundering in the
sloughs of 19th century theories? Should the strong be
permitted to push the weak to the wall? Should they be
allowed to ride roughshod over the weak? Should the courts
sit back and watch supinely while the strong trample
underfoot the rights of the weak?
It was opined:
"The law exists to serve the needs of the society which is
governed by it. If the law is to play its allotted role of serving
the needs of the society, it must reflect the ideas and
ideologies of that society. It must keep time with the
heartbeats of the society and with the needs and aspirations
of the people. As the society changes, the law cannot remain
immutable. The early nineteenth century essayist and wit,
Sydney Smith, said: 'When I hear any man talk of an
9
(1986) 3 SCC 156
72
unaltelrable law, I am convinced that he is an unalterable
fool." The law must, therefore, in a changing society march
in tune with the changed ideas and ideologies"
31. Constitutions have to evolve the mode for welfare of their
citizens. Flexibility is the hallmark of our Constitution. The
growth of the Constitution shall be organic, the rate of
change glacial. Regard being had from R. Stevens, the
English Judges:Their Role in the Changing Constitution
(Oxford 2002), p. xiii) [Quoted by Lord Woolf in 'The Rule
of Law and a Change in the Constitution, 2004
Cambridge Law Journal 317]. A school would be a ‗State'
if it is granted financial aid, as said in Jiby P. Chacko v.
Mediciti School of Nursing, Ghanpur, Ranga Reddy
District and Anr.10.
32. An association, performing function of Housing Board,
would be performing a public function and would be
bound to comply with Human Rights Act, 1998. Reliance
may be had from Poplar Housing and Regeneration
Community Association Ltd. v. Donoghue11. A school
can be run by a private body without any State patronage.
It is permissible in law because a citizen has fundamental
right to do so as his occupation in terms of Articles
19(1)(g) and 26. But once a school receives State
patronage, its activities would be State activities and thus
10
2002 (2) ALD 827
11
[2002] Q.B. 48]
73
would be subject to judicial review. Even otherwise it is
subjected to certain restrictions as regard its right to
spend its money out of the profit earned. Reliance in this
regard is placed on T. M. A. Pai Foundation and Others
v. State of Karnataka and Others12 and Islamic
Academy of Education and Another v. State of
Karnataka and Others13.
33. The concept of ‗public law' function is yet to be
crystallised. Concededly, however, the power of judicial
review can be exercised by this Court under Article 226 of
the Constitution of India, only in a case, where the dispute
involves a public law element as contradistinguished from
a private law dispute, as has been stated and observed in
Dwarka Prasad Agarwal (D) by LRs. and another v.
B.D. Agarwal and others14. General view, however, is
that whenever a State or an instrumentality of a State is
involved, it will be regarded as an issue within the
meaning of ‗public law' but where individuals are at
loggerheads, the remedy therefor has to be resorted in
private law field. Situation, however, changes with the
advancement of the State function particularly when it
enters in the fields of commerce, industry and business,
12
(2002) 8 SCC 481
13
(2003) 6 SCC 697
14
(2003) 6 SCC 230
74
as a result whereof either private bodies take up public
functions and duties, or they are allowed to do so. The
distinction has narrowed down but again concededly such
a distinction still exists. Drawing an inspiration from the
decisions, as discussed above, it may be safely inferred
that when essential governmental functions were placed
or allowed to be performed by private body, they must be
held to have undertaken ‗public duty' or public functions.
Same is true as to respondent CVPP herein. The
respondent CVPP has to undertake public importance
project(s), where, obviously, not only public interest but
public function as well is involved, i.e. execution of three
Hydroelectric Projects namely Pakal Dul, Kiru and Kwar,
with aggregate capacity of 2164 MW at Chenab River
Basin in Distt Kishtwar of Jammu & Kashmir. The said
responsibility and task was that of the J&K State
Government in assistance/consultation with the Central
Government. Both the State and Central Governments
have assigned the said task and job to respondent CVPP.
The respondent CVPP has not only to own the said
Projects, but also to operate and maintain the said
Projects. Thus, respondent CVPP, after completion of
said Projects, is also to operate and maintain the said
Projects. In addition, it would not be appropriate to give
75
such hydroelectric projects in the hands of individuals/
private persons/company(ies) for individual/personal
gains. Respondent CVPP is to exercise all rights and
powers exercisable in planning, investigation, research,
design and preparation of preliminary, feasibly and
definite project reports, construction, generation,
operation, maintenance of Power Stations and Projects,
transmission, distribution, trading and sale of power and
to carry on business of purchasing, selling, importing,
exporting, producing, trading, manufacturing or otherwise
dealing in all aspects of planning, investigation, research,
design and preparation of preliminary, feasibility and
definite project reports, construction, generation,
operation and maintenance of Power Stations and
Projects, transmission, distribution and sale of Power,
Power Development and for that purpose to install
operate and manage all necessary plants, establishments
and works. The activities of CVPP, therefore, cannot be
said to be carried by a private industry or an individual for
individual/personal gains and profits.
34. When the State "merely" authorizes a given "private"
action imagine a green light at a street corner authorizing
pedestrians to cross if they wish that action cannot
automatically become one taken under "state authority" in
76
any sense that makes the Constitution applicable. Which
authorizations have, that Constitution triggering effect will
necessarily turn on the character of the decision making
responsibility thereby placed (or left) in private hands.
However described, there must exist a category of
responsibilities regarded at any given time as so "public"
or "governmental" that their discharge by private persons,
pursuant to state authorization even though not
necessarily in accord with the State direction, is subject to
the federal constitutional norms that would apply to public
officials discharging those same responsibilities. For
example, deciding to cross the street when a police officer
says you may, is not such a "public function;" but
authoritatively deciding who is free to cross and who must
stop, is a "public function", whether or not the person
entrusted under State law to perform that function wears
a police uniform and is paid a salary from state revenues
or wears civilian garb and serves as a volunteer crossing
guard". Performance of a public function in the context of
the Constitution of India, would be to allow an entity to
perform the function as an authority within the meaning
of Article 12, which makes it subject to the constitutional
discipline of fundamental rights.
77
35. It may not be out of place to mention here that the
Government, representing executive authority of the
State, does act through instrumentality or agency of
natural persons or it employs instrumentality or agency of
certain persons to carry out its functions. In the early
days, when the Government had limited functions, it did
operate effectively through natural persons, constituting
its civil service and they were found adequate to
discharge governmental functions, which were of
traditional vintage. But as the tasks of the Government
burgeoned the advent of the welfare State, it began to be
increasingly felt that framework of civil service was not
sufficient to handle new tasks, which were often of
specialised and highly technical character. The
inadequacy of civil service to deal with these new
problems, came to be thought of and it became
necessary to forge a new instrumentality or administrative
device for handling these new problems. It was in these
circumstances and with a view to supplying this
administrative need that the public corporation(s),
body(ies), authority(ies) came into being as the third arm
of the Government. As early as in 1819, the Supreme
Court of the United States in Mac Cullough v.
78
Maryland15, held that the Congress has power to charter
corporations as incidental to or in aid of governmental
functions and, as pointed out by Mathew, J., in Sukhdev
Singh v. Bhagat Ram case (supra), such federal
corporations would ex hypothesi be agencies of the
Government. In Great Britain too, the policy of public
administration through separate corporations and bodies
was gradually evolved and the conduct of basic industries
through giant corporations and companies, has now
become a permanent feature of public life. So far as India
is concerned, the genesis of emergence of corporations
and companies as instrumentalities or agencies of
Government, is to be found in the Government of India
Resolution on Industrial Policy dated 6th April, 1948,
where it was stated, inter alia, that "management of State
enterprises will as a rule be through the medium of public
corporation under the statutory control of the Central
Government who will assume such powers as may be
necessary to ensure this". It was in pursuance of the
policy envisaged in this and subsequent resolutions on
Industrial Policy that corporations were created by
Government for setting up and management of public
enterprises and carrying out other public functions.
15
4 Wheat 315 (1819)
79
Ordinarily these functions could have been carried out by
Government departmentally through its service personnel,
but the instrumentality or agency of the corporations,
authorities and companies, was resorted to in these
cases, given the nature of the task to be performed. The
corporations, companies and authorities, acting as
instrumentality or agency of Government would obviously
be subject to the same limitations in the field of
constitutional and administrative law as Government
itself, though in the eye of the law, they would be distinct
and independent legal entities. If Government, acting
through its officers, is subject to certain constitutional and
public law limitations, it must follow a fortiori that
Government, acting through the instrumentality or agency
of corporations, companies or bodies, should equally be
subject to the same limitations. But the question is how to
determine whether a corporation, company or a body, is
acting as instrumentality or agency of Government. It is a
question not entirely free from difficulty.
36. A corporation or company may be created in one or two
ways. It may be either established by statute or
incorporated under a law, such as the Companies Act or
Societies Registration Act. Where a corporation is wholly
controlled by Government not only in its policy making but
80
also in carrying out the functions entrusted to it by the law
establishing it or by the Charter of its incorporation, there
can be no doubt that it would be an instrumentality or
agency of Government. But ordinarily where a corporation
is established by statute, it is autonomous in its working,
subject only to a provision, often times made, that it shall
be bound by any directions that may be issued from time
to time by Government in respect of policy matter. So also
a corporation incorporated under law is managed by a
board of directors or committee of management in
accordance with the provisions of the statute under which
it is incorporated. When does such a corporation become
an instrumentality or agency of Government? Is the
holding of the entire share capital of the Corporation by
Government enough or is it necessary that in addition,
there should be a certain amount of direct control
exercised by Government and, if so, what should be the
nature of such control? Should the functions which the
corporation is charged to carry out possess any particular
characteristic or feature, or is the nature or the functions
immaterial? Now, one thing is clear that if the entire share
capital of the corporation is held by Government, it would
go a long way towards indicating that the corporation is
an instrumentality or agency of Government. But, as is
81
quite often the case, a corporation, established by statute,
may have no shares or shareholders, in which case it
would be a relevant factor to consider whether the
administration is in the hands of a board of directors
appointed by Government, though this consideration also
may not be determinative, because even while the
directors are appointed by Government, they may be
completely free from governmental control in discharge of
their functions. What then are the tests to determine
whether a corporation established by statute or
incorporated under law is an instrumentality or agency of
Government? It is not possible to formulate an all-
inclusive or exhaustive test, which would adequately
answer this question. There is no cut and dried formula,
which would provide the correct division of corporations or
companies into those which are instrumentalities or
agencies of Government and those which are not.
37. The analogy of the concept of State action as developed
in the United States may not, however, be altogether out
of place while considering this question. The decisions of
the courts in the United States, seem to suggest that a
private agency, if supported by extraordinary assistance
given by the State, may be subject to the same
constitutional limitations as the State. Indubitably, it may
82
be pointed out that the State's general common law and
statutory structure under which its people carry on their
private affairs, own property and contract, each enjoying
equality in terms of legal capacity, is not such State
assistance as would transform private conduct into State
action. However, if extensive and unusual financial
assistance is given and the purpose of the Government in
giving such assistance coincides with the purpose for
which the corporation is expected to use the assistance
and such purpose is of public character, it may be a
relevant circumstance supporting an inference that the
corporation or company is an instrumentality or agency of
Government. The leading case on the subject in the
United States is Kerr v. Eneck Pratt Free Library16. The
Library system in question in this case was established by
private donation in 1882, but by 1944, 99 per cent of the
system's budget was supplied by the city, title to the
library property was held by the city, employees there
paid by the city payroll officer and a high degree of budget
control was exercised or available to the city government.
On these facts the Court of Appeal required the trustees
managing the system to abandon a discriminatory
admission policy for its library training courses. It will be
16
149 F 2d 212
83
seen that in this case there was considerable amount of
State control of the library system in addition to extensive
financial assistance and it is difficult to say whether, in the
absence of such control it would have been possible to
say that the action of the trustees constituted State action.
Thomas P. Lewis has expressed the opinion in his article
on "The meaning of State Action" (60 Colombia Law
Review 1083) that in this case "it is extremely unlikely that
absence of public control would have changed the result
as long as 99% of the budget of a nominally private
institution was provided by government. Such extensive
governmental support should be sufficient identification
with the Government to subject the institution to the
provisions of the Fourteenth Amendment". It may,
therefore, be possible to say that where the financial
assistance of the State is so much as to meet almost
entire expenditure of the corporation, it would afford some
indication of the corporation being impregnated with
governmental character. But where financial assistance is
not so extensive, it may not by itself, without anything
more render the corporation an instrumentality or agency
of government, for there are many private institutions,
which are in receipt of financial assistance from the State
and merely on that account, they cannot be classified as
84
State agencies. Equally a mere finding of some control by
the State would not be determinative of the question
"since a State has considerable measure of control under
its police power over all types of business operations".
But ―a finding of State financial support plus an unusual
degree of control over the management and policies
might lead one to characteristic an operation as State
action" as observed in Sukhdev Singh v. Bhagatram
case (supra). So also the existence of deep and
pervasive State control may afford an indication that the
corporation/company is a State agency or instrumentality.
It may also be a relevant factor to consider whether the
company enjoys monopoly status, which is State
conferred or State protected. There can be little doubt that
State conferred or State protected monopoly status would
be highly relevant in assessing the aggregate weight of
the corporation's ties to the State, as are the observations
of Douglas, J., in Jackson v. Metropolitan Edison Co17.
38. Another factor that can as well be regarded as having a
bearing on this issue and it is whether operation of
corporation, company, body or entity is an important
public function. It has been held in a number of cases in
the United States that the concept of private action must
17
419 US 345 : 42 L Ed 2d 477
85
yield to a conception of State action, where public
functions are being performed as said by Arthur S. Miller
["The Constitutional Law of the Security State" (10
Stanford Law Review 620 at 664)]. It was pointed out by
Douglas, J., in Evans v. Newton18, that "when private
individuals or groups are endowed by the State with
powers or functions, governmental in nature, they
become agencies or instrumentalities of the State". Same
is apropos in present case as well. Respondent CVPP
has been endowed by the State Government as well as
Central Government with powers and functions, which, in
essence, are governmental in nature, therefore,
respondent CVPP becomes agency or for that matter
instrumentality of the State.
39. Of course, with the growth of welfare State, it is very
difficult to define what functions are governmental and
what are not, because, as pointed out by Villmer, L.J. in
[Pfizer v. Ministry of Health19, there has been since mid-
Victorian times, "a revolution in political thought and a
totally different conception prevails today as to what is
and what is not within the functions of Government".
Douglas, J., also observed to the same effect in New
18
382 US 296 : 15 L Ed 2d 373
19
(1964) 1 Ch 614, 641 : (1963) 1 All ER 590 (affirmed in 1965) AC 512]
86
York v. United States20: "A State's project is as much a
legitimate governmental activity whether it is traditional or
akin to private enterprise, or conducted for profit." And as
observed is in Cf. Helverillg v. Gerhardt21: A State may
deem it as essential to its economy that it owns and
operates a railroad, a mill, or an irrigation system as it
does to own and operate bridges, streetlights, or a
sewage disposal plant. What might have been viewed in
an earlier days as an improvident or even dangerous
extension of State activities, may today be deemed
indispensable. It may be noted that besides the so-called
traditional functions, the modern State operates a
multitude of public enterprises and discharges a host of
other public functions. If the functions of the corporation,
company or body are of public importance and closely
related to governmental functions, it would be a relevant
factor in classifying the corporation, company or body as
an instrumentality or agency of Government. This is
precisely what was pointed out by Mathew, J., in
Sukhdev v. Bhagatram (supra) where learned Judge
said that "institutions engaged in matters of high public
interest of performing public functions are by virtue of the
nature of the functions performed government agencies.
20
326 U.S. 572
21
304 U.S. 405, 426, 427
87
Activities which are too fundamental to the society are by
definition too important not to be considered government
functions. This demands the delineation of a theory which
requires government to provide all persons with all
fundamentals of life and the determinations of aspects
which are fundamental. The state today has an affirmative
duty of seeing that all essentials of life are made available
to all persons. The task of the state today is to make
possible the achievement of a Good life both by removing
obstacles in the path of such achievements and in
assisting individual in realizing his ideal of self-
perfection‖.In the present case, respondent CVPPis
engaged in matters of high public interest and/or
performing public functions, which are by virtue of the
nature of the functions being performed by government
departments. It is germane to point out that the State
today has an affirmative duty of seeing that all essentials
of life are made available to its citizens. The task of the
State today is to make possible achievement of a good
life, both by removing obstacles in path of such
achievements and in assisting individual in realizing his
ideal of self-perfection. The State needs power, to run
State machinery, banks, hospitals, schools, industries
etcetera. The power (electricity), it may not be out of
88
place to mention here, can very well be said, has catapult
to pinnacle, where one cannot imagine life without
electricity. Our life today is contingent on electricity.
Household utensils, tools, gadgets, appliances, reliant on
electricity, have made our life easier. Minus electricity, our
life is Stone Age. In such circumstances, the major and
main focus of the State is to provide more and more
electricity to its citizens and for that aim and objective,
CVPP has been established. Therefore, respondent
CVPP is discharging the important public importance
function of the State.
40. Chenab Valley Power Projects Private Limited -
respondent No.1, which is a Joint Venture of National
Hydro Power Corporation Limited (NHPC), JKSPDC and
PTC India Limited, has been given responsibility to plan,
promote and organise an integrated and efficient
development of Pakal Dul, Kiru and Kwar Hydroelectric
Projects. Respondent CVPP is to execute these Projects
on Build, Own, Operate and Maintain (BOOM) basis.
Respondent CVPP is to use and utilise all the resources
of J&K State, for public purpose i.e. to generate and
supply power. And generation and supply of power
cannot be permitted to be in the hands of an individual or
private person.
89
41. Further to say, one of the principal tests applied by the
United States Supreme Court in Marsh v. Alabama22for
holding that a corporation which owned a Company town,
was subject to the same constitutional limitations as the
State. This case involved the prosecution of Marsh, a
member of the Johevah's witnesses' sect, under a state
trespass statute for refusing to leave the side walk of the
company town where she was distributing her religious
pamphlets. She was fined $ 5/- and aggrieved by her
conviction she carried the matter right upto the Supreme
Court contending successfully that by reason of the action
of the corporation her religious liberty had been denied.
The Supreme Court held that administration of private
property such as a town, though privately carried on, was,
nevertheless, in the nature of a public function and that
the private rights of the corporation must, therefore, be
exercised within constitutional limitations and the
conviction for trespass was reversed. The dominant
theme of the majority opinion written by Mr Justice Black
was that the property of the corporation used as a town
not recognisably different from other towns, lost its
identification as purely private property. It was said that a
town may be privately owned and managed but that does
22
326 U.S. 501: 19 L Ed. 265 (1946)
90
not necessarily allow the corporation to treat it as if it was
wholly in private sector and the exercise of constitutionally
protected rights on public, street of a company town could
not be denied by the owner. "The more an owner, for his
advantage, opens up his property for use by the public in
general, the more do his rights become circumscribed by
the statutory and constitutional rights of those who use it.
. . Thus, the owners of privately held bridges, ferries,
turnpikes and railroads may not operate them as freely as
a farmer does his farm. Since these facilities are built and
operated primarily to benefit the public and since their
operation is essentially a public function, it is subject to
state regulation". Mr Justice Frankfurter, concurring,
reduced the case to simpler terms. He found in the realm
of civil liberties the need to treat a town, private or not, as
a town. The function exercised by the corporation was in
the nature of municipal function and it was, therefore,
subject to the constitutional limitations placed upon State
action.
42. The same test of public or governmental character of the
function was applied by the Supreme Court of the United
States in Evans v. Newton (supra) and Smith v.
91
Allwigh23. The decisions show that even this test of
public or governmental character of the function is not
easy of application and does not invariably lead to the
correct inference because the range of governmental
activity is broad and varied and merely because an
activity may be such as may legitimately be carried on by
Government, it does not mean that a corporation/
company, which is otherwise a private entity, would be an
instrumentality or agency of Government by reason of
carrying on such activity. In fact, it is difficult to distinguish
between governmental functions and non-governmental
functions. Perhaps the distinction between governmental
and non-governmental functions is not valid any more in a
social welfare State where the laissez faire is an
outmoded concept and Herbert Spencer's social statics
has no place. The contrast is rather between
governmental activities which are private and private
activities which are governmental. But the public nature of
the function, if impregnated with governmental character
or "tied or entwined with Government" or fortified by some
other additional factor, may render the corporation an
instrumentality or agency of Government. In distinction
from others, if a department of Government is transferred
23
5 321 US 649
92
to a corporation, it would be a strong factor supportive of
this inference. It will, thus, be seen that there are several
factors which are to be considered in determining whether
a corporation, company or a body is an agency or
instrumentality of Government. Some of these factors
which may be summarised are: whether there is any
financial assistance given by the State, and if so, what is
the magnitude of such assistance; whether there is any
other form of assistance, given by the State; and if so
whether it is of the usual kind or it is extraordinary;
whether there is any control of the management and
policies of the corporation by the State and what is the
nature and extent of such control; whether a body enjoys
State conferred or State protected monopoly status and
whether the functions carried out by the company or
corporation are public functions closely related to
governmental functions. This particularisation of relevant
factors is however not exhaustive and by its very nature it
cannot be, because with increasing assumption of new
tasks, growing complexities of management and
administration and the necessity of continuing adjustment
in relations between the company, corporation or a body
and Government calling for flexibility, adapt ability and
innovative skills, it is not possible to make an exhaustive
93
enumeration of the tests, which would invariably and in all
cases provide an unfailing answer to the question
whether a corporation, organisation, company or a body
is governmental instrumentality or agency. Moreover even
amongst these factors which have been described, no
one single factor will yield a satisfactory answer to the
question and the court will have to consider the
cumulative effect of these various factors and arrive at its
decision on the basis of a particularised inquiry into the
facts and circumstances of each case. ―The dispositive
question in any stale action case," as pointed out by
Douglas, J., in Jackson v. Metropolitan Edison
Company(supra) ―is not whether any single fact or
relationship presents a sufficient degree of state
involvement, but rather whether the aggregate of all
relevant factors compels a finding of state responsibility‖.
It is not enough to examine seriatim each of the factors
upon which a body, company or corporation is claimed to
be an instrumentality or agency of the Government and to
dismiss each individually as being insufficient to support a
finding of that effect. It is the aggregate or cumulative
effect of all the relevant factors that is controlling. Now,
obviously where a company, organisation, or a body is an
instrumentality or agency of Government, it would, in the
94
exercise of its power or discretion, be subject to the same
constitutional or public law limitations as Government.
43. The rule inhibiting arbitrary action by Government which
we have discussed above must apply equally where such
a body, corporation or company is dealing with the public,
whether by way of giving jobs or entering into contracts or
otherwise, and it cannot act arbitrarily and enter into
relationship with any person it likes at its sweet will, but its
action must be in conformity with some principle which
meets the test of reason and relevance. Now this rule,
flowing as it does from Article 14, applies to every State
action and since "State" is defined in Article 12 of the
Constitution, to include not only the Government of India
and the Government of each of the States, but also "all
local or other authorities within the territory of India or
under the control of the Government of India", it must
apply to action of "other authorities" and they must be
held subject to the same constitutional limitation as the
Government. But the question arises what are the "other
authorities" contemplated by Article 12 of the Constitution
of India, which fall within the definition of 'State'? On this
question considerable light is thrown by the Supreme
Court in Rajasthan Electricity Board v. Mohan Lal24. In
24
(1967) 3 SCR 377: AIR SC 1857
95
the said case the Supreme Court considered the
question, whether Rajasthan Electricity Board was an
'authority' within meaning of the expression "other
authorities" in Article 12 of the Constitution.Bhargava, J.,
delivering the judgment of the majority pointed out that
the expression "other authorities", in Article 12 of the
Constitution of India, would include all constitutional and
statutory authorities on whom powers are conferred by
law. The learned Judge also said that if a body of persons
has authority to issue directions, disobedience whereof
would be punishable as a criminal offence, that would be
an indication that that authority is 'State'. Shah, J., who
delivered a separate judgment, agreeing with the
conclusion reached by the majority, preferred to give a
slightly different meaning to the expression "other
authorities". He said that authorities, constitutional or
statutory, would fall within the expression "other
authorities" only if they are invested with the sovereign
power of the State, namely, the power to make rules and
regulations which have the force of law. The ratio of this
decision may thus be stated to be that a constitutional or
statutory authority would be within the meaning of the
expression "other authorities", if it has been invested with
statutory power to issue binding directions to third parties,
96
the disobedience of which would entail penal
consequence or it has the sovereign power to make rules
and regulations having the force of law. This test was
followed by Ray, C.J., in Sukhdev v. Bhagat Ram
(supra). Mathew, J., in the same case, propounded a
broader test, namely, whether the statutory corporation or
other body or authority, claimed to fall within the definition
of State', is as instrumentality or agency of Government: if
it is, it would fall within the meaning of the expression
'other authorities' and would be ‗State'.
44. The most significant expression used in Article 12 is
―other authorities‖. This expression is not defined in the
Constitution. The interpretation of the term ―other
authorities‖ has caused a good deal of difficulty, and
judicial opinion has undergone changes over time.
Today's government performs a large number of functions
because of the prevailing philosophy of a social welfare
state. The government acts through natural persons as
well as juridical persons. Some functions are discharged
through traditional governmental departments and
officials while some functions are discharged through
autonomous bodies existing outside the departmental
structure, such as companies, corporations etcetera.
While the government acting departmentally, or through
97
officials, undoubtedly, falls within the definition of ‗state‖
under Article 12, doubts had been cast as regards the
character of autonomous bodies. Whether they could be
regarded as ‗authorities' under Article 12 and, thus, be
subject to Fundamental Rights. An autonomous body may
be a statutory body, i.e. a body set up directly by a
statute, or it may be a non-statutory body, i.e. body
registered under general law, such as, the Companies
Act, the Societies Registration Act, or a State Cooperative
Societies Act, etc. Questions have been raised whether
such bodies may be included within the coverage of
Article 12. For this purpose, the Supreme Court has
developed the concept of an ―instrumentality‖ of the State.
Any ‗body' which can be regarded as an ―instrumentality‖
of the State, falls under Article 12. The reason for
adopting such a broad view of Article 12 is that the
Constitution should, whenever possible, be construed as
to apply to arbitrary application of power against
individuals by centres or power. The emerging principle
appears to be that a public corporation being a creation of
the state is subject to the Constitutional limitation as the
state itself. Further that the governing power wherever
located must be subject to fundamental constitutional
limitations. The question was considered more thoroughly
98
in Ramana D. Shetty v. International Airport
Authority25. The International Airport Authority, a
statutory body, was held to be an ‗authority'. The
Supreme Court also developed the general proposition
that an ‗instrumentality' or ‗agency' of the government
would be regarded as an ‗authority' or ‗State' within Article
12 and laid down some tests to determine whether a body
could be regarded as an instrumentality or not. Where a
corporation is an instrumentality or agency of the
government, it would be subject to the same constitutional
or public law limitation as the government itself. In this
case, the Court was enforcing the mandate of Article 14
against the corporation.
45. In Som Prakash v. Union of India26, the company was
held to fall under Article 12. The Court emphasized that
the true test for the purpose whether a body was an
‗authority' or not was not whether it was formed by a
statute, or under a statue, but it was ―functional‖. In the
instant case, the key factor was ―the brooding presence of
the state behind the operations of the body, statutory or
other‖. In this case, the body was semi-statutory and
semi-non-statutory. It was non-statutory in origin, as it
was registered; it also was recognised by the Act in
25
(1979) 3 SCC 489
26
(1981) 1 SCC 449
99
question and, thus had some ―statutory flavour‖ in its
operation and functions. The question regarding the
status of a non-statutory body was finally clinched in Ajay
Hasia v. Khalid Mujib27, where a society registered
under the Societies Registration Act, running the regional
engineering college, sponsored, supervised and
financially supported by the Government, was held to be
an ‗authority'. Money to run the college was provided by
the State and Central Governments. The State
Government could review the functioning of the college
and issue suitable instructions if considered necessary.
Nominees of the State and Central Government were
members of the society including its Chairman. The
Supreme Court ruled that where a corporation is an
instrumentality or agency of the government, it must be
held to be an authority under Article 12 of the Constitution
of India. The concept of instrumentality or agency of the
government is not limited to a corporation created by a
statute but is equally applicable to a company or society.
Thus, a registered society was held to be an ‗authority' for
the purposes of Article 12. Ajay Hasia has initiated a new
judicial trend, viz. that of expanding the significance of the
term ―authority‖. The Supreme Court in the said case laid
27
(1981) 1 SCC 722
100
down the following tests to adjudge whether a body is an
instrumentality of the government or not:
a) If the entire share capital of the corporation is held by
government it would go a long way towards indicating
that the corporation is an instrumentality or agency of
the government.
b) Where the financial assistance of the State is so much
as to make almost entire expenditure of the
corporation, it would assume indication of the
corporation being impregnated with governmental
character.
c) It may also be a relevant factor whether the
Corporation enjoys monopoly status which is State
conferred or State protected.
d) Existence of deep and pervasive State control may
afford an indication that the Corporation is an agency
or instrumentality.
e) If the functions of the corporation are of public
importance and closely related government functions it
would be a relevant factor in classifying the corporation
as an instrumentality or agency of the Government.
46. The important question is not how the juristic person is
born, but why has it been into existence? It does not
matter what is the structure of the body in question: it may
be statutory or non-statutory; it may be set up by, or
under, an Act of the Legislature or even administratively.
It does not matter whether the body in question has been
101
set up initially by the government or by private enterprise.
It does not matter what functions the body does
discharge; it may be government, semi government,
educational, commercial, banking, social service. The
Supreme Court has pointed out that even if it may be
assumed that one or the other test as provided in the
case of Ajay Hasia may be attracted, that by itself would
not be sufficient to hold that it is an agency of the State or
a company carrying on the functions of the public nature
or State. In view of the several views and tested
suggested by the Supreme Court it is not possible to
make a close ended category of bodies which would be
considered to be a state within the meaning of Article 12.
The question in each case will have to be considered on
the basis of facts available as to whether in the light of the
cumulative facts as established, the body is financially,
functionally, administratively dominated, by, or under the
control of the Government. Such control must be
particularly to the body in question and must be
pervasive.
47. The Courts have been led to take expansive view of
Article 12 because of the feeling that if instrumentalities of
the government are not subject to the same legal
discipline as the government itself because of the plea
102
that they were distinct and autonomous legal entities,
then the government would be tempted to adopt the
stratagem of setting up such administrative structures on
a big scale in order to evade the discipline and constraints
of the Fundamental Rights thus eroding and negating
their efficacy to a very large extent. In this process,
judicial control over these bodies would be very much
weakened.
48. The judicial anvil was in Mysore Paper Mills Ltd. vs. The
Mysore Paper Mills Officers Association JT 2002 (1)
SC 61 which fairly represents what we have seen as a
continuity of thought commencing from the decision in
Rajasthan Electricity Board in 1967 upto the present time.
It held that a company substantially financed and
financially controlled by the Government, managed by a
Board of Directors nominated and removable at the
instance of the Government and carrying on important
functions of public interest under the control of the
Government is 'an authority' within the meaning of Art.12.
49. The Supreme Court in Pradeep Kumar Biswas v. Indian
Institute of Chemical Biology28, by majority view,
agreed to the statement of law in Rajasthan Electricity
Board case (supra), that "The State, as defined in Art.12,
28
(2002) 5 SCC 111
103
is thus comprehended to include bodies created for the
purpose of promoting the educational and economic
interests of the people". What has been observed in
Pradeep Kumar Biswas, by majority view, is:
―The picture that ultimately emerges is that the tests
formulated in Ajay Hasia are not a rigid set of principles so
that if a body falls within any one of them it must, ex
hypothesi, be considered to be a State within the meaning of
Article 12. The question in each case would be whether in
the light of the cumulative facts as established, the body is
financially, functionally and administratively dominated by or
under the control of the Government. Such control must be
particular to the body in question and must be pervasive. If
this is found then the body is a State within Article 12. On the
other hand, when the control is merely regulatory whether
under statute or otherwise, it would not serve to make the
body a State.
xxxxxx
These objects which have been incorporated in the
Memorandum of Association of CSIR manifestly
demonstrate that CSIR was set up in the national interest to
further the economic welfare of the society by fostering
planned industrial development in the country. That such a
function is fundamental to the governance of the country has
already been held by a Constitution Bench of this Court as
far back as in 1967 in Rajasthan Electricity Board v.
Mohan Lal (Supra) where it was said:
"The State, as defined in Art.12, is thus
comprehended to include bodies created for the
purpose of promoting the educational and economic
interests of the people".
We are in respectful agreement with this statement of the
law.‖
50. The term ―authority‖ used in Article 226, must receive a
liberal meaning unlike the term in Article 12.Article 226
confers power on the High Courts to issue writs for
enforcement of the fundamental rights as well as non-
fundamental rights. The words ―any person or authority‖
used in Article 226 are, therefore, not to be confined only
104
to statutory authorities and instrumentalities of the State.
They may cover any other person or body performing
public duty. The form of the body concerned is not very
much relevant. What is relevant is the nature of the duty
imposed on the body. The duty must be judged in the light
of positive obligation owed by the person or authority to
the affected party. No matter by what means the duty is
imposed, if a positive obligation exists mandamus cannot
be denied.‖ In Dr. Janet Jeyapaul v. SRM University
and anr (AIR) 2016 SC 73, while discussing Article 12
and 226 of the Constitution of India, the Supreme Court
has observed and opined:
―(h) Against the said order, respondent No.1 herein filed Writ
Appeal No. 932 of 2013 before the High Court. By impugned
judgment dated 04.07.2013, the Division Bench of the High
Court allowed the appeal. It was held that the writ petition
filed by the appellant against respondent No.1 was not
maintainable as according to the Division Bench, respondent
No.1 is neither a State nor an authority within the meaning of
Article 12 of the Constitution of India and hence it cannot be
subjected to writ jurisdiction of the High Court under Article
226 of the Constitution to examine the legality and
correctness of the dismissal order. The Division Bench,
therefore, did not examine the merits of the case made out
by the appellant successfully before the Single Judge. The
Division Bench, however, granted liberty to the appellant to
approach the Tribunal for ventilating of her grievance on
merits.
xxxxx
7. Submissions of Mr. Harish Salve were many fold.
According to him, while deciding the question as to whether
the writ lies under Article 226 of the Constitution of India
against any person, juristic body, organization, authority etc.,
the test is to examine in the first instance the object and
purpose for which such body/authority/organization is formed
so also the activity which it undertakes to fulfill the said
object/purpose.
8. Pointing out from various well known English
commentaries such as De Smith's Judicial Review, 7th
Edition, H.W.R.Wade and C.F. Forsyth Administrative law,
105
10th Edition, Michael J. Beloff in his article Pitch, Pool,
Rink,......Court? Judicial Review in the Sporting World, 1989
Public Law 95, English decisions in Breen vs. A.E.U. (1971)
2 QB 175, R. vs. Panel on Take-overs and Mergers, ex parte
Datafin Plc and another (Norton Opax Plc and another
intervening) (1987) 1 All ER 564, E.S. Evans vs. Charles E.
Newton 382 US 296 (1966) and of this Court in Andi Mukta
Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti
Mahotsav Smarak Trust & Ors. vs. V.R. Rudani & Ors.,
(1989) 2 SCC 691 and Zee Telefilms Ltd. vs. Union of India
(2005) 4 SCC 649, Mr. Harish Salve submitted that perusal
of these authorities/decisions would go to show that there
has been a consistent view of all the learned authors
and the Courts all over the world including in India that
the approach of the Court while deciding such issue is
always to test as to whether the concerned body is
formed for discharging any "Public function" or "Public
duty" and if so, whether it is actually engaged in any
public function or/and performing any such duty.
9. According to learned counsel, if the aforesaid twin test
is found present in any case then such person/body/
organization/authority, as the case may be, would be
subjected to writ jurisdiction of the High Court under
Article 226 of the Constitution.
10. Learned senior counsel elaborated his submission by
pointing out that the expression "any person or authority"
used in Article 226 are not confined only to statutory
authorities and instrumentalities of the State but may in
appropriate case include any other person or body
performing "public function/duty". Learned counsel urged
that emphasis is, therefore, always on activity undertaken
and the nature of the duty imposed on such authority to
perform and not the form of such authority. According to Mr.
Harish Salve, once it is proved that the activity undertaken
by the authority has a public element then regardless of the
form of such authority it would be subjected to the rigor of
writ jurisdiction of Article 226 of the Constitution.
11. Learned counsel then urged that in the light of several
decisions of this Court, one cannot now perhaps dispute that
"imparting education to students at large" is a "public
function" and, therefore, if any body or authority, as the case
may be, is found to have been engaged in the activity of
imparting education to the students at large then irrespective
of the status of any such authority, it should be made
amenable to writ jurisdiction of the High Court under Article
226 of the Constitution.
12. Learned counsel further pointed out that the case in
hand clearly shows that respondent No. 1 - a juristic body is
engaged in imparting education in higher studies and what is
more significant is that respondent No. 1 is conferred with a
status of a ―Deemed University" by the Central Government
under Section 3 of the UGC Act. These two factors,
according to Mr. Harish Salve, would make respondent No. 1
amenable to writ jurisdiction of the High Court under Article
226 because it satisfies the twin test laid down for attracting
the rigor of writ jurisdiction of the High Court.
106
xxxxx
14. Having heard learned counsel for the parties and on
perusal of the record of the case, we find force in the
submissions urged by Mr. Harish Salve.
15. To examine the question urged, it is apposite to take
note of what De Smith, a well-known treaty, on the subject
"Judicial Review" has said on this question [See De Smith's
Judicial Review, 7th Edition, page 127 (3-027) and page 135
(3-038)].
―AMENABILITY TEST BASED ON THE SOURCE OF
POWER. The courts have adopted two
complementary approaches to determining whether a
function falls within the ambit of the supervisory
jurisdiction. First, the court considers the legal source
of power exercised by the impugned decision-maker.
In identifying the ―classes of case in which judicial
review is available‖, the courts place considerable
importance on the source of legal authority exercised
by the defendant public authority. Secondly and
additionally, where the ―source of power‖ approach
does not yield a clear or satisfactory outcome, the
court may consider the characteristics of the function
being performed. This has enabled the courts to
extend the reach of the supervisory jurisdiction to
some activities of non-statutory bodies (such as self-
regulatory organizations). We begin by looking at the
first approach, based on the source of power.‖
―JUDICIAL REVIEW OF PUBLIC FUNCTIONS The
previous section considered susceptibility to judicial
review based on the source of the power: statute or
prerogative. The courts came to recognize that an
approach based solely on the source of the public
authority's power was too restrictive. Since 1987 they
have developed an additional approach to
determining susceptibility based on by the type of
function performed by the decision-maker. The ―public
function‖ approach is, since 2000, reflected in the Civil
Procedure Rules: CPR.54.1(2)(a)(ii), defines a claim
for judicial review as a claim to the lawfulness of ―a
decision, action or failure to act in relation to the
exercise of a public function.‖ (Similar terminology is
used in the Human Rights Act 1998, s. 6(3)(b) to
define a public authority as ―any person certain of
whose functions are functions of a public nature‖, but
detailed consideration of that provision is postponed
until later). As we noted at the outset, the term
―public‖ is usually a synonym for ―governmental‖.‖
16. The English Courts applied the aforesaid test in R. vs.
Panel on Take-overs and Mergers, ex parte Datafin Plc and
another (Norton Opax Plc and another intervening) (1987) 1
All ER 564, wherein Sir John Donaldson MR speaking for
three-judge Bench of Court of Appeal (Civil Division), after
examining the various case law on the subject, held as
under:
―In determining whether the decisions of a
particular body were subject to judicial review, the
107
court was not confined to considering the source
of that body's powers and duties but could also
look to their nature. Accordingly, if the duty
imposed on a body, whether expressly or by
implication, was a public duty and the body was
exercising public law functions the court had
jurisdiction to entertain an application for judicial
review of that body's decisions.......‖
17. In Andi Mukta's case (supra), the question before this
Court arose as to whether mandamus can be issued at the
instance of an employee (teacher) against a Trust registered
under Bombay Public Trust Act, 1950 which was running an
educational institution (college). The main legal objection of
the Trust while opposing the writ petition of their employee
was that since the Trust is not a statutory body and hence it
cannot be subjected to the writ jurisdiction of the High Court.
The High Court accepted the writ petition and issued
mandamus directing the Trust to make payments towards
the employee's claims of salary, provident fund and other
dues. The Trust (Management) appealed to this Court.
18. This Court examined the legal issue in detail. Justice K.
Jagannatha Shetty speaking for the Bench agreed with the
view taken by the High Court and held as under:
―11. Two questions, however, remain for
consideration:
(i) The liability of the appellants to pay compensation
under Ordinance 120-E and
(ii) The maintainability of the writ petition for
mandamus as against the management of the
college.........
12. The essence of the attack on the maintainability of
the writ petition under Article 226 may now be
examined. It is argued that the management of the
college being a trust registered under the Bombay
Public Trust Act is not amenable to the writ jurisdiction
of the High Court. The contention in other words, is
that the trust is a private institution against which no
writ of mandamus can be issued. In support of the
contention, the counsel relied upon two decisions of
this Court: (a) Executive Committee of Vaish Degree
College, Shamli v. Lakshmi Narain, (1976) 2 SCC 58
and (b) Deepak Kumar Biswas v. Director of Public
Instructions, (1987) 2 SCC 252. In the first of the two
cases, the respondent institution was a Degree
College managed by a registered cooperative society.
A suit was filed against the college by the dismissed
principal for reinstatement. It was contended that the
Executive Committee of the college which was
registered under the Cooperative Societies Act and
affiliated to the Agra University (and subsequently to
Meerut University) was a statutory body. The
importance of this contention lies in the fact that in
such a case, reinstatement could be ordered if the
dismissal is in violation of statutory obligation. But this
Court refused to accept the contention. It was
observed that the management of the college was not
108
a statutory body since not created by or under a
statute. It was emphasised that an institution which
adopts certain statutory provisions will not become a
statutory body and the dismissed employee cannot
enforce a contract of personal service against a non-
statutory body.
15. If the rights are purely of a private character no
mandamus can issue. If the management of the
college is purely a private body with no public duty
mandamus will not lie. These are two exceptions to
mandamus. But once these are absent and when the
party has no other equally convenient remedy,
mandamus cannot be denied. It has to be appreciated
that the appellants trust was managing the affiliated
college to which public money is paid as government
aid. Public money paid as government aid plays a
major role in the control, maintenance and working of
educational institutions. The aided institutions like
government institutions discharge public function by
way of imparting education to students. They are
subject to the rules and regulations of the affiliating
University. Their activities are closely supervised by
the University authorities. Employment in such
institutions, therefore, is not devoid of any public
character. So are the service conditions of the
academic staff. When the University takes a decision
regarding their pay scales, it will be binding on the
management. The service conditions of the academic
staff are, therefore, not purely of a private character. It
has super-added protection by University decisions
creating a legal right-duty relationship between the
staff and the management. When there is existence of
this relationship, mandamus cannot be refused to the
aggrieved party.
20. The term ―authority‖ used in Article 226, in the
context, must receive a liberal meaning unlike the
term in Article 12.Article 12 is relevant only for the
purpose of enforcement of fundamental rights under
Article 32.Article 226 confers power on the High
Courts to issue writs for enforcement of the
fundamental rights as well as non-fundamental
rights. The words "any person or authority" used
in Article 226 are, therefore, not to be confined
only to statutory authorities and instrumentalities
of the State. They may cover any other person or
body performing public duty. The form of the
body concerned is not very much relevant. What
is relevant is the nature of the duty imposed on
the body. The duty must be judged in the light of
positive obligation owed by the person or
authority to the affected party. No matter by what
means the duty is imposed, if a positive obligation
exists mandamus cannot be denied.‖
19. This issue was again examined in great detail by the
Constitution Bench in Zee Telefilms Ltd. & Anr. Vs. Union of
India & Ors., (2005) 4 SCC 649 wherein the question which
109
fell for consideration was whether the Board of Control for
cricket in India (in short ―BCCI‖) falls within the definition of
―State‖ under Article 12 of the Constitution. This Court
approved the ratio laid down in Andi Mukta's case(supra) but
on facts of the case held, by majority, that the BCCI does not
fall within the purview of the term State. This Court, however,
laid down the principle of law in Paras 31 and 33 as under :
―31. Be that as it may, it cannot be denied that the
Board does discharge some duties like the selection
of an Indian cricket team, controlling the activities of
the players and others involved in the game of cricket.
These activities can be said to be akin to public duties
or State functions and if there is any violation of any
constitutional or statutory obligation or rights of other
citizens, the aggrieved party may not have a relief by
way of a petition under Article 32. But that does not
mean that the violator of such right would go scot-free
merely because it or he is not a State. Under the
Indian jurisprudence there is always a just remedy for
the violation of a right of a citizen. Though the remedy
under Article 32 is not available, an aggrieved party
can always seek a remedy under the ordinary course
of law or by way of a writ petition under Article 226 of
the Constitution, which is much wider than Article 32.
33. Thus, it is clear that when a private body
exercises its public functions even if it is not a
State, the aggrieved person has a remedy not only
under the ordinary law but also under the
Constitution, by way of a writ petition under
Article 226......................‖
20. It is clear from reading of the ratio decidendi of judgment
in Zee Telefilms Ltd. (supra) that firstly, it is held therein that
the BCCI discharges public duties and secondly, an
aggrieved party can, for this reason, seek a public law
remedy against the BCCI under Article 226 of the
Constitution of India.
21. Applying the aforesaid principle of law to the facts of the
case in hand, we are of the considered view that the Division
Bench of the High Court erred in holding that respondent
No.1 is not subjected to the writ jurisdiction of the High Court
under Article 226 of the Constitution. In other words, it
should have been held that respondent No.1 is subjected to
the writ jurisdiction of the High Court under Article 226 of the
Constitution.
22. This we say for the reasons that firstly, respondent No. 1
is engaged in imparting education in higher studies to
students at large. Secondly, it is discharging "public function"
by way of imparting education. Thirdly, it is notified as a
"Deemed University" by the Central Government under
Section 3 of the UGC Act. Fourthly, being a ―Deemed
University‖, all the provisions of the UGC Act are made
applicable to respondent No. 1, which inter alia provides for
effective discharge of the public function - namely education
for the benefit of public. Fifthly, once respondent No. 1 is
declared as ―Deemed University" whose all functions and
activities are governed by the UGC Act, alike other
110
universities then it is an "authority" within the meaning of
Article 12 of the Constitution. Lastly, once it is held to be an
"authority" as provided in Article 12 then as a necessary
consequence, it becomes amenable to writ jurisdiction of
High Court under Article 226 of the Constitution.
23. In the light of foregoing discussion, we cannot concur
with the finding rendered by the Division Bench and
accordingly while reversing the finding we hold that the
appellant's writ petition under Article 226 of the Constitution
against respondent No. 1 is maintainable.‖ (emphasis supplied)
51. To settle Issue No.1, let's see ―whether respondent No.1
falls within realm of Article 12, Constitution of India‖.
Chenab Valley Power Projects [P] Limited (CVPP), has
been incorporated on 13th June 2011 as a Joint Venture
Company of NHPC Limited, JKSPDC and PTC (India)
Limited, for execution of 03 Hydroelectric Projects namely
Pakal Dul, Kiru and Kwar with aggregate capacity of 2164
MW at Chenab River Basin in District Kishtwar of Jammu
& Kashmir, with equity participation of 49%, 49% and 2%
by NHPC, JKSPDC & PTC respectively. Respondent
CVPP is to execute these Projects on Build, Own,
Operate and Maintain (BOOM) basis. Thus it can be safe
to say that respondent CVPP in not only Government of
India undertaking but Government of J&K undertaking as
well. It has to undertake public importance project(s),
where, obviously, public interest is involved, i.e. execution
of three Hydroelectric Projects namely Pakal Dul, Kiru
and Kwar, with aggregate capacity of 2164 MW at
Chenab River Basin in Distt Kishtwar of Jammu &
111
Kashmir. And thereafter it has not only to own the said
Projects, but also to operate and maintain the said
Projects. Thus, respondent CVPP is not a Project or a
Programme for a particular period of time, to execute the
above Projects, but after completion of said Projects, it is
to operate and maintain the said Projects thereafter.
Above and beyond, it would not be appropriate to give
such hydroelectric projects in the hands of private
persons/company(ies). Memorandum of Association of
CVPP reveals that CVPP is to act as an ―agent‖ of
Government. CVPP is to use and utilize the important
resource of the State i.e. water, for generation of power.
The water of the State is not a personal property of any
individual. It is the property of the State and its subjects.
CVPP is to make use of land of the State for construction
of hydroelectric projects. The land is to be provided either
by the Government (Government Department(s), or by
subjects of the State. CVPP's Memorandum of
Association also provides that it will exercise all rights and
powers exercisable in planning, investigation, research,
design and preparation of preliminary, feasibly and
definite project reports, construction, generation,
operation, maintenance of Power Stations and Projects,
transmission, distribution, trading and sale of power and
112
to carry on business of purchasing, selling, importing,
exporting, producing, trading, manufacturing or otherwise
dealing in all aspects of planning, investigation, research,
design and preparation of preliminary, feasibility and
definite project reports, construction, generation,
operation and maintenance of Power Stations and
Projects, transmission, distribution and sale of Power,
Power Development and for that purpose to install
operate and manage all necessary plants, establishments
and works. The activities of CVPP, therefore, cannot be
said to be carried by a private industry as if the CVPP is
owned or controlled by an individual person or a
commercial company, but carries the above activities in
the capacity of being an agency or instrumentality of the
State. In that view of the matter, respondent CVPP is the
voice and the hands of the Central Government and State
Government.
52. In such situation, being an undertaking of both
Government of India and Government of J&K, respondent
CVPP is to generate and supply the power to both
Government of India and Government of J&K. In that view
of matter, as far as provisions of Article 12 of the
Constitution, are concerned, respondent CVPP being
―instrumentality‖ of the State, the provisions of Article
113
12 of the Constitution of India are attracted, and for that
reason, writ petition under Article 226 of the Constitution
is maintainable. This aspect also gets support from the
law laid down in Shri Anadi Mukta Sadguru Shree
Muktajee Vandasjiswami Suvarna Jayanti Mahotsa vs.
Smarak Trust and others29wherein the Supreme Court
has held that term "authority" used in Article 226, in the
context, must receive a liberal meaning unlike the term
in Article 12. Article 12 is relevant only for the purpose of
enforcement of fundamental rights under Article
32. Article 226 confers power on the High Courts to issue
writs for enforcement of the fundamental rights as well as
non-fundamental rights. The words "any person or
authority" used in Article 226 are, therefore, not to be
confined only to statutory authorities and instrumentality
of the State. They may cover any other person or body
performing public duty. The form of the body concerned is
not very much relevant. Similarly, in Ramesh Ahluwalia
v. State of Punjab & Ors.30, it is held that writ cannot be
denied if a person or authority concerned performs public
duty not necessarily imposed by the Statute.
Technicalities should not come in the way of granting
relief. Reliance is also placed on the judgment of
29
AIR 1989 C 1607
30
(2012) 12 SCC 331
114
Supreme Court in the case of Zee Telefilms Ltd. & Anr.
Vs. Union of India & Ors.31. It has been held that when a
private body exercises its public functions even if it is not
a State, aggrieved person has a remedy not only under
the ordinary law but also under the Constitution, by way of
a writ petition under Article 226. Apart from that,
respondents have made some admission as about
respondent CVPP being agency or instrumentality of the
State. In written argument, in the concluding paragraph,
respondent CVPP has submitted that Pakal Dul is a
prestigious project and upon completion will bring much
needed relief to the people of Jammu & Kashmir from
power shortages in addition to huge revenue generation
for the State. It is further averred in the written argument
that the project is of utmost importance, involving huge
public money and that the project is listed under Prime
Minister Reconstruction Plan (PMRP) for Jammu &
Kashmir and is being vigorously monitored by various
Ministries, Government of India and Office of Prime
Minister (PMO) and needs to be implemented at the
earliest. In addition to that, respondent CVPP in its
objections to the writ petition has at various places stated
that impugned decision cancelling the turnkey tender and
31
(2005) 4 SCC 649
115
flowing new tenders is neither arbitrary, nor discriminatory
nor with mala fide intention but the interest of public
because it involves huge public money and that scope of
judicial review in matters relating to award of contracts by
the State and its instrumentalities is settled by a long line
of decisions by the Supreme Court. Though respondent
CVPP has tried to show itself a private entity, yet
respondent CVPP has cited judgements and decisions,
which exclusively relate to the action of the State, its
agencies and instrumentalities in contract matters and not
to private entities. And on the basis of said cited
judgements, respondent CVPP defends, rationalizes and
guards its decision, impugned in this writ petition.That
being the case, respondent CVPP is amenable to
writ jurisdiction of this Court.
53. After deciding first issue in affirmative, let's discuss and
decide Second Issue viz. whether the impugned decision
of respondent CVPP, cancelling "turnkey tender" as also
petitioner's bid and issuing fresh tender notices for
"package mode", is arbitrary and unreasonable. And on
deciding the said Issue (Issue no.2) what would be its
impact and what would be the relief that this Court would
pass in favour of either of the parties.
116
54. Learned senior counsel for petitioner has placed reliance
on various judgments in support of his written as well as
oral submissions. It would be appropriate to take up and
discuss the said judgements sequentially:
55. CSPEDI - TRISHE Consortium v. Tamil Nadu
Generation and Distribution Corporation Limited32.
The said case is totally different from the instant one. In
the said case, third respondent was identified as L1 and
appellant was said to have no role, after L1 was identified.
Besides, the judgment is not conclusive per se. The
judgement again remanded the subject-matter to
TANGEDCO for evaluation of the appellant's price bid
along with the bid of the third respondent therein. What is
important to be seen is the concluding para (paragraph
40) of the judgement. It closes on the observation that
―this Court has not expressed any opinion on whether or
not the subject contract should be awarded to the
appellant or the 3rd respondent as it is for the
TANGEDCO to decide which one of these two bidders,
would subserve the large public interest in executing the
project by taking into consideration all relevant
parameters‖. Insofar as case in hand is concerned, there
is no third party, who has been declared as lowest bidder
32
[2015 (7) MLJ 260]
117
(L1) or given preference and petitioner company thrown
out of the race.
56. Associated Provincial Picture Houses Ltd v.
Wednesbury Corporation33. This is an English law case
that sets out the standard of unreasonableness of the
public body decisions that would make them liable to be
quashed on judicial review, known as Wednesbury
unreasonableness. In the said case, the court gave three
conditions on which it would intervene to correct a bad
administrative decision, including on grounds of its
unreasonableness in the special sense later articulated in
Council of Civil Service Unions v Minister for the Civil
Service34, by Lord Diplock: So outrageous in its defiance
of logic or accepted moral standards that no sensible
person, who had applied his mind to the question to be
decided, could have arrived at it.The fact of the said case
are that in 1947 Associated Provincial Picture Houses
was granted a licence by the Wednesbury Corporation in
Staffordshire to operate a cinema on condition that no
children under 15, whether accompanied by an adult or
not, were admitted on Sundays. Under the
Cinematograph Act 1909, cinemas could be opened from
33
[1972 (2) All. ELR 680]
34
[1984] 3 All ER 935
118
Mondays to Saturdays but not on Sundays, and under a
Regulation, the commanding officer of military forces in a
neighbourhood could apply to the licensing authority to
open a cinema on Sunday. The Sunday Entertainments
Act 1932 legalized opening cinemas on Sundays by the
local licensing authorities "subject to such conditions as
the authority may think fit to impose" after a majority vote
by the borough. Associated Provincial Picture Houses
sought a declaration that Wednesbury's condition was
unacceptable and outside the power of the Corporation to
impose. The Court held that it could not intervene to
overturn the decision of the defendant simply because the
court disagreed with it. To have the right to intervene, the
court would have to conclude that: in making the decision,
the defendant took into account factors that ought not to
have been taken into account, or the defendant failed to
take into account factors that ought to have been taken
into account, or the decision was so unreasonable that no
reasonable authority would ever consider imposing it. The
court held that the decision did not fall into any of these
categories and the claim failed. As Lord Greene, M.R
said: It is true the discretion must be exercised
reasonably. Now what does that mean? Lawyers familiar
with phraseology, commonly used in relation to exercise
119
of statutory discretions, often use the word
"unreasonable" in a rather comprehensive sense. It has
frequently been used and is frequently used as a general
description of the things that must not be done. For
instance, a person entrusted with a discretion must, so to
speak, direct himself properly in law. He must call his own
attention to the matters which he is bound to consider. He
must exclude from his consideration matters which are
irrelevant to what he has to consider. If he does not obey
those rules, he may truly be said, and often is said, to be
acting "unreasonably." Similarly, there may be something
so absurd that no sensible person could ever dream that
it lay within the powers of the authority. Warrington LJ in
Short v Poole Corporation35, gave the example of the
red-haired teacher, dismissed because she had red hair.
That is unreasonable in one sense. In another sense it is
taking into consideration extraneous matters. It is so
unreasonable that it might almost be described as being
done in bad faith and, in fact, all these things run into one
another. The test laid down in this case, in all three limbs,
is known as "the Wednesbury test". The term
"Wednesbury unreasonableness" is used to describe the
third limb, of being so unreasonable that no reasonable
35
[1926] Ch. 66, 90, 91
120
authority could have decided that way. This case or the
principle laid down is cited in United Kingdom courts as a
reason for courts to be hesitant to interfere with decisions
of administrative law bodies. In recent times, particularly
as a result of the enactment of the Human Rights Act
1998, the judiciary have resiled from this strict
abstentionist approach, recognising that in certain
circumstances it is necessary to undertake a more
searching review of administrative decisions. The
European Court of Human Rights requires the reviewing
court to subject the original decision to "anxious scrutiny"
as to whether an administrative measure infringes a
Convention right. In order to justify such an intrusion,
respondents will have to show that they pursued a
"pressing social need" and that the means, employed to
achieve this, were proportionate to the limitation of the
right. The UK courts have also ruled that an opinion
formed by an employer in relation to a contractual matter
has to be "reasonable" in the sense in which that
expression is used in Associated Provincial Picture
Houses Ltd v Wednesbury Corporation: Some extracts of
the said cited judgement are: ―What, then, is the power of
the courts? They can only interfere with an act of
executive authority if it be shown that the authority has
121
contravened the law.... On the face of it, a condition of
the kind imposed in this case is perfectly lawful. It is not to
be assumed prima facie that responsible bodies like the
local authority in this case will exceed their powers; but
the court, whenever, it is alleged that the local authority
have contravened the law, must not substitute itself for
that authority. It is only concerned with seeing whether or
not the proposition is made good." In the present case
what is to be seen is whether or not the decision, taken by
respondent CVPP in cancelling turnkey tender as also
petitioner company's offer and issuing fresh tenders for
‗package mode', is good. As already pointed out, we
should not forget the importance of the project. The NIT
for ―Turnkey Mode‖ has been cancelled by respondent
CVPP and in its place ―PackageMode‖ has been adopted.
Respondent CVPP has not started or initiated afresh the
same ―Turnkey mode‖, after taking impugned decision, to
preclude petitioner company from entering the said arena,
but has come up with new mode and mechanism, which
is called ‗package mode'. Respondent CVPP is the
master in the field, equipped with experts. Whatever the
respondent CVPP, in its wisdom, has thought better and
decided for achieving the goal of establishing the Project
in question, is best known to it and that decision is
122
unopen to be put in a dock. This Court is not equipped or
armed with necessary specialists, experts, to sit in
judgement over the effectiveness of respondent CVPP's
decision as regards starting and initiating fresh tender
process on ―Package Mode‖. Respondent CVPP was and
is within its domain to cancel petitioner company's
offer/bid having regard to importance of the project and
issue fresh tender on ―package mode‖ instead of ―turnkey
mode‖. It cannot be heard saying from petitioner that
respondent CVPP, while cancelling petitioner company's
bid, entered into negotiation or, for that matter, contract
with some other tenderer/bidder on ―Turnkey Mode‖.
Respondent CVPP has in whole cancelled ―Turnkey
Tender‖ mode and invited fresh bids on ―Package Mode‖,
so that respondent CVPP incurs cost for only those
events which actually occurs.
57. Drillmec S.P.A. v. Oil India Limited & ors36. Insofar as
the said case is concerned, it relates to awarding of
contract in favour of respondent no.4 instead of petitioner,
while ignoring his bid. In the cited case, petitioner was not
informed about rejection of its bid, not to speak of
disclosure of the grounds thereof. The petitioner filed writ
petition claiming strict adherence of the terms and
36
[2013 (3) GauLT 624 : 2013 (4) GauLJ 58]
123
conditions of the bid and to award the contract, having
regard to the lowest bid offered by it and that it was only
when respondents filed affidavit-in-opposition, wherein
they first time disclosed the factum of rejection of the bid
as well as the grounds of such rejection and award of
contract to third party. The present case, as ingeminated
above, is distinguishable from the facts and
circumstances of the said case inasmuch as present
petitioner is before this Court with cancellation order in his
hand and in the present case contract has not been
awarded to any third party.
58. Maa Binda Express Carrier and another v. North-East
Frontier Railway and others(supra). The cited
judgement squarely covers the instant case. The
Supreme Court in the cited case has held that the
bidders, participating in tender process, cannot insist that
their tenders should be accepted simply because a given
tender is highest or lowest depending upon whether
contract is for sale of public property or for execution of
works on behalf of the Government. It would be
advantageous to reproduce relevant portion of judgement
hereunder:
―Suffice it to say that not only is the reserve price applicable
as on date higher than the amount offered by the appellant
but even the market survey has brought forth rates higher
than what was offered by the appellant. Allotment of any
124
contract at the rate offered by the appellant would, therefore,
result in a substantial financial loss to the railways which is
neither in the public interest nor necessitated by any legal
compulsion. Time lag in such matters plays an important role
as it indeed has in the case at hand.
8. The scope of judicial review in matters relating to award of
contract by the State and its instrumentalities is settled by a
long line of decisions of this Court. While these decisions
clearly recognize that power exercised by the Government
and its instrumentalities in regard to allotment of contract is
subject to judicial review at the instance of an aggrieved
party, submission of a tender in response to a notice inviting
such tenders is no more than making an offer which the
State or its agencies are under no obligation to accept. The
bidders participating in the tender process cannot, therefore,
insist that their tenders should be accepted simply because
a given tender is the highest or lowest depending upon
whether the contract is for sale of public property or for
execution of works on behalf of the Government. All that
participating bidders are entitled to is a fair, equal and non-
discriminatory treatment in the matter of evaluation of their
tenders. It is also fairly well-settled that award of a contract is
essentially a commercial transaction which must be
determined on the basis of consideration that are relevant to
such commercial decision. This implies that terms subject to
which tenders are invited are not open to the judicial scrutiny
unless it is found that the same have been tailor made to
benefit any particular tenderer or class of tenderers. So also
the authority inviting tenders can enter into negotiations or
grant relaxation for bona fide and cogent reasons provided
such relaxation is permissible under the terms governing the
tender process.
9. Suffice it to say that in the matter of award of contracts the
Government and its agencies have to act reasonably and
fairly at all points of time. To that extent the tenderer has an
enforceable right in the Court who is competent to examine
whether the aggrieved party has been treated unfairly or
discriminated against to the detriment of public interest.
(See: Meerut Development Authority v. Association of
Management Studies and Anr. etc. (2009) 6 SCC 171
and Air India Ltd. v. Cochin International Airport Ltd. (2000) 1
SCR 505).
10. The scope of judicial review in contractual matters was
further examined by this Court in Tata Cellular v. Union of
India (1994) 6 SCC 651, Raunaq International Ltd.'s case
(supra) and in Jagdish Mandal v. State of Orissa and Ors.
(2007) 14 SCC 517 besides several other decisions to which
we need not refer. In Michigan Rubber (India) Ltd. v. State of
Karnataka and Ors. (2012) 8 SCC 216 the legal position on
the subject was summed up after a comprehensive review
and principles of law applicable to the process for judicial
review identified in the following words:
―19. From the above decisions, the following
principles emerge:
(a) the basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence
125
and substance is the heartbeat of fair play. These
actions are amenable to the judicial review only to the
extent that the State must act validly for a discernible
reason and not whimsically for any ulterior purpose. If
the State acts within the bounds of reasonableness, it
would be legitimate to take into consideration the
national priorities;
(b) fixation of a value of the tender is entirely
within the purview of the executive and courts
hardly have any role to play in this process except
for striking down such action of the executive as is
proved to be arbitrary or unreasonable. If the
Government acts in conformity with certain healthy
standards and norms such as awarding of contracts
by inviting tenders, in those circumstances, the
interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender
document and awarding a contract, greater latitude is
required to be conceded to the State authorities
unless the action of tendering authority is found to be
malicious and a misuse of its statutory powers,
interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders
have to be laid down to ensure that the contractor has
the capacity and the resources to successfully
execute the work; and
(e) If the State or its instrumentalities act reasonably,
fairly and in public interest in awarding contract, here
again, interference by Court is very restrictive since
no person can claim fundamental right to carry on
business with the Government.
20. Therefore, a Court before interfering in tender or
contractual matters, in exercise of power of judicial review,
should pose to itself the following questions:
(i) Whether the process adopted or decision made by
the authority is mala fide or intended to favour
someone; or whether the process adopted or decision
made is so arbitrary and irrational that the court can
say: "the decision is such that no responsible
authority acting reasonably and in accordance with
relevant law could have reached"; and
(ii) Whether the public interest is affected. If the
answers to the above questions are in negative, then
there should be no interference under Article 226.‖
(emphasis supplied)
11. As pointed out in the earlier part of this order the
decision to cancel the tender process was in no way
discriminatory or mala fide. On the contrary, if a contract
had been awarded despite the deficiencies in the tender
process serious questions touching the legality and propriety
affecting the validity of the tender process would have
arisen. In as much as the competent authority decided to
cancel the tender process, it did not violate any fundamental
right of the appellant nor could the action of the respondent
126
be termed unreasonable so as to warrant any interference
from this Court. The Division Bench of the High Court was, in
that view, perfectly justified in setting aside the order passed
by the Single Judge and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed
with costs assessed at Rs.25,000/-― (Emphasis supplied)
In the cited judgement, not only appeal has been
dismissed but costs as well have been imposed by the
Supreme Court. It would be appropriate to say that the
above judgement, cited by learned senior counsel for
petitioner,has proved to be the petitioner's Achilles' heelin
its case against respondent CVPP.
59. Master Marine Services (P) Ltd. v. Metcalfe &
Hodgkinson (P) Ltd. and another37, cited by learned
senior counsel for petitioner is again not giving some
useful and necessary helpto present petitioner as it
relates to award of contract in favour of a particular
individual/person. In the said cited case, contract was
awarded to appellant (Master Marine Services (P) Ltd),
against which first respondent (Metcalfe & Hodgkinson
(P) Ltd.) filed writ petition before the Delhi High Court.
Writ petition, vide judgment and order dated 15th
December 2004, was allowed, quashing contract of work
of professional services awarded by second respondent
(Container Corporation of India) in favour of appellant.
37
(2005) 6 SCC 138
127
Aggrieved thereof, appeal, by special leave, was
preferred by appellant before the Supreme Court. In
concluding part, the Supreme Court holds that ―In such
circumstances, no such public interest was involved
which may warrant interference by the High Court in
exercise of its extraordinary jurisdiction under Article 226
of the Constitution while undertaking judicial review of an
administrative action relating to award of contract. We
are, therefore, clearly of the opinion that the High Court
erred in setting aside the order of CONCOR awarding the
contract to the appellant‖. Thus, it can be safe to say that
the Supreme Court has vehemently held that the High
Court erred in allowing writ petition while undertaking
judicial review of an administrative action relating to
award of contract.
60. B. S. N. Joshi & Sons Ltd. v. Nair Coal Services Ltd.
and others38. In the cited case, challenge was thrown to
acceptance of tender of appellant as appellant was stated
to have failed to fulfil essential qualifications as contained
in the Conditions of the Notice Inviting Tender before the
Nagpur Bench of Bombay High Court. Writ petition was
allowed by a Division Bench of the High Court by reason
of judgment, quashing the Order, awarding contract in
38
(2006) 11 SCC 548
128
favour of appellant. Dissatisfied therewith, appellant
knocked at doors of the Supreme Court. The outcome of
appeal was that the Supreme Court gave right to the
authority to consider offer of appellant. Upon
consideration of matter afresh, as to whether it even now
fulfils essential tender conditions. If it satisfies terms of
tender conditions, contract may be awarded in favour of
appellant. In the case in hand, respondent CVPP has not
awarded contract in favour of either petitioner or for that
matter any other Consortium. The Supreme Court in the
cited judgment observed that it may be true that a
contract need not be given to the lowest tenderer but it is
equally true that the employer is the best judge therefor.
The same ordinarily being within its domain. The court's
interference in such matter should be minimal. The High
Court's jurisdiction in such matters being limited in a case
of this nature. The Court should normally exercise judicial
restraint unless illegality or arbitrariness on the part of the
employer is apparent on the face of the record. It would
be profitable to reproduce paragraphs 56 to 59 of the said
decision infra:
―56.It may be true that a contract need not be given to the
lowest tenderer but it is equally true that the employer is the
best judge therefor; the same ordinarily being within its
domain, court's interference in such matter should be
minimal. The High Court's jurisdiction in such matters being
limited in a case of this nature, the Court should normally
exercise judicial restraint unless illegality or arbitrariness on
129
the part of the employer is apparent on the face of the
record.
57. This Court in Guruvayoor Devaswom Managing
Committee and Another v. C.K. Rajan and Others [(2003) 7
SCC 546] observed:
"30. Dawn Oliver in Constitutional Reforms in the UK
under the heading "The Courts and Theories of
Democracy, Citizenship and Good Governance" at p.
105 states:
"However, this concept of democracy as rights-based
with limited governmental power, and in particular of
the role of the courts in a democracy, carries high
risks for the judges and for the public. Courts may
interfere inadvisedly in public administration. The
case of Bromley London Borough Council v. Greater
London Council11 is a classic example. The House of
Lords quashed the GLC cheap fares policy as being
based on a misreading of the statutory provisions, but
were accused of themselves misunderstanding
transport policy in so doing. The courts are not
experts in policy and public administration hence
Jowell's point that the courts should not step
beyond their institutional capacity (Jowell, 2000).
Acceptance of this approach is reflected in the
judgments of Laws, L.J. in International Transport
Roth GmbH v. Secy. of State for the Home Deptt.12
and of Lord Nimmo Smith in Adams v. Lord
Advocate13, in which a distinction was drawn
between areas where the subject-matter lies within
the expertise of the courts (for instance, criminal
justice, including sentencing and detention of
individuals) and those which were more appropriate
for decision by democratically elected and
accountable bodies. If the courts step outside the
area of their institutional competence, the
Government may react by getting Parliament to
legislate to oust the jurisdiction of the courts
altogether. Such a step would undermine the rule of
law. The Government and public opinion may come to
question the legitimacy of the judges exercising
judicial review against Ministers and thus undermine
the authority of the courts and the rule of law."
[See also State of U.P. and Another v. Johri Mal
(2004) 4 SCC 714]
58. In Jagdish Swarup's Constitution of India, 2nd Edition,
page 286, it is stated:
"It is equally true that even in contractual matters, a
public authority does not have an unfettered decision
to ignore the norms recognized by the Courts, but at
the same time if a decision has been taken by a
public authority in a bona fide manner, although not
strictly following the norms laid down by the Courts,
such decision is upheld on the principle that the
Courts, while judging the constitutional validity of
130
executing decisions, must grant a certain measure of
freedom of "play in the joints" to the executive."
59. Recently, in Master Marine Services (P) Ltd. v. Metcalfe
& Hodgkinson (P) Ltd and Another [(2005) 6 SCC 138], upon
noticing a large number of decisions, this Court stated
"15. The law relating to award of contract by the State
and public sector corporations was reviewed in Air
India Ltd. v. Cochin International Airport Ltd.4 and it
was held that the award of a contract, whether by a
private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at
a decision and it is free to grant any relaxation for
bona fide reasons, if the tender conditions permit
such a relaxation. It was further held that the State, its
corporations, instrumentalities and agencies have the
public duty to be fair to all concerned. Even when
some defect is found in the decision-making process,
the court must exercise its discretionary powers under
Article 226 with great caution and should exercise it
only in furtherance of public interest and not merely
on the making out of a legal point. The court should
always keep the larger public interest in mind in order
to decide whether its intervention is called for or not.
Only when it comes to a conclusion that
overwhelming public interest requires interference,
the court should interfere."
61. Asha Sharma v. Chandigarh Administration and
others [(2011) 10 SCC 86]. This cited case relates to
allotment and retention of government accommodation by
an officer belonging to Indian Administration Services and
not qua contract. The facts of the cited case have no
equation with the present case. The rules and regulations
vis-à-vis allotment and extension of government
accommodation to a government officer, cannot bear a
resemblance to the rules and regulations governing the
field of contracts. The Supreme Court observed that
courts can issue directions with regard to the dispute in a
particular case, but should be very reluctant to issue
131
directions, which are legislative in nature. It would be
advantageous to extract relevant portion of the judgement
hereunder:
―13. The Government is entitled to make pragmatic
adjustments and policy decisions, which may be
necessary or called for under the prevalent peculiar
circumstances. The Court may not strike down a policy
decision taken by the Government merely because it
feels that another decision would have been more fair or
wise, scientific or logical. The principle of reasonableness
and non-arbitrariness in governmental action is the core of
our constitutional scheme and structure. Its interpretation will
always depend upon the facts and circumstances of a given
case. Reference in this regard can also be made to Netai
Bag v. State of West Bengal [(2000) 8 SCC 262].
14. xxxxx
19. However, in the case of Guruvayoor Devaswom
Managing Committee vs. C.K. Rajan [(2003) 7 SCC 546] this
Court, while specifying the scope and ambit of the Public
Interest Litigation, clearly distinguished between the powers
of the High Court under Article 226of the Constitution and
the powers of this Court under Article 142 of the Constitution
and observed
―50. (x) The Court would ordinarily not step out of the
known areas of judicial review. The High Courts
although may pass an order for doing complete
justice to the parties, it does not have a power akin
toArticle 142 of the Constitution of India'.
20. Usefully, reference can also be made to the judgment of
this Court in the case of Reliance Airport Developers (P) Ltd.
v. Airport Authority of India and Ors. [(2006) 10 SCC 1],
where while considering the scope for judicial interference in
matters of administrative decisions, this Court held that it is
trite law that exercise of power, whether legislative or
administrative, will be set aside if there is manifest error in
the exercise of such power or if the exercise of power is
manifestly arbitrary. Courts would exercise such power
sparingly and would hardly interfere in a manner which may
tantamount to enacting a law. They must primarily serve to
bridge any gaps or to provide for peculiar unforeseen
situations that may emerge from the facts and circumstances
of a given case. These directions would be in force only till
such time as the competent legislature enacts laws on the
same issue. The high courts could exercise this power,
again, with great caution and circumspection. Needless to
say, when the High Court issues directions, the same ought
not to be in conflict with laws remaining in force and with the
directions issued by this Court.
21. In Chandigarh Administration v. Manpreet Singh [(1992)
1 SCC 380] while dealing with a matter of admission to
132
engineering colleges and reservation of seats etc., this Court
held as under:
"11. Counsel for Chandigarh Administration and the
college (petitioners in SLP Nos. 16066 and 16065 of
1991) contended that the High Court has exceeded its
jurisdiction in granting the impugned directions. He
submitted that High Court, while exercising the writ
jurisdiction conferred upon by Article 226 of the
Constitution of India, does not sit as an appellate
authority over the rule-making authority nor can it
rewrite the rules. If the rule or any portion of it was
found to be bad, the High Court could have struck it
down and directed the rule-making authority to re-
frame the rule and make admissions on that basis but
the High Court could not have either switched the
categories or directed that Shaurya Chakra should be
treated as equivalent to Vir Chakra. By its directions,
the High Court has completely upset the course of
admissions under this reserved quota and has gravely
affected the chances of candidates falling in category
4 by downgrading them as category 5 without even
hearing them. These are good reasons for the
categorisation done by the Administration which was
adopted by the college.
* * *
21. While this is not the place to delve into or detail
the self-constraints to be observed by the courts while
exercising the jurisdiction under Article 226, one of
them, which is relevant herein, is beyond dispute viz.,
while acting under Article 226, the High Court does
not sit and/or act as an appellate authority over the
orders/actions of the subordinate authorities/tribunals.
Its jurisdiction is supervisory in nature. One of the
main objectives of this jurisdiction is to keep the
government and several other authorities and
tribunals within the bounds of their respective
jurisdiction. The High Court must ensure that while
performing this function it does not overstep the well
recognised bounds of its own jurisdiction."
22. It is a settled canon of Constitutional Jurisprudence that
this Court in the process of interpreting the law can remove
any lacunae and fill up the gaps by laying down the
directions with reference to the dispute before it; but
normally it cannot declare a new law to be of general
application in the same manner as the Legislature may do.
This principle was stated by a Seven-Judge Bench of this
Court in the case of P. Ramachandra Rao v. State of
Karnataka [(2002) 4 SCC 578].
23. On a proper analysis of the principles stated by this
Court in a catena of judgments including the judgment afore-
referred, it is clear that the courts can issue directions with
regard to the dispute in a particular case, but should be very
reluctant to issue directions which are legislative in
nature....‖ (emphasis supplied)
133
What emerges from the above is that the
Government is entitled to make adjustments and policy
decisions, which may be necessary or called for under the
prevalent peculiar circumstances. The Court may not
strike down a policy decision taken by the Government
merely because it feels that another decision would have
been more fair or wise, scientific or logical. Having said
so, respondent CVPP has taken a decision, which
petitioner company has impugned in instant writ petition,
to go for execution of work in question by ―Package
Mode‖ instead of ―Turnkey Mode‖; this Court cannot ask
or, for that matter, foist respondent CVPP to adopt a
particular policy, because the policy decision, taken by
respondent CVPP, equipped with and having battery of
experts, mavens, professionals with it, is within its domain
and not the domain of this Court.
62. Rishi Kiran Logistics Private Limited v. Board of
Trustees of Kandla Port Trust and others [(2015) 13
SCC 233]. The cited judgement, while answering all
issues/points raised by learned senior counsel for
petitioner in support of the writ petition,settle all those
issues/points at rest, which relate, in core, to awarding
contract to a particular person and reject tenders of
others. It would be advantageous to reproduce pertinent
134
portion of the judgement herein below as it discusses and
decides the Issue as regards the decision taken by the
authority therein, to cancel the tender process and start
fresh process, as has been done by respondent CVPP in
the present case, and the Supreme Court held that the
decision taken by the authority, cancelling tender process
and starting fresh process was not arbitrary and mala
fide:
―I. Whether decision contained in Resolution no. 108 dated
9.12.2010 is arbitrary and mala fide.
xxx x x
21. ........ there is hardly any scope for argument that the
decision of the Port Trust is arbitrary. It is based on valid
considerations. We have to keep in mind that while
examining this aspect we are in the realm of administrative
law. The contractual aspect of the matter has to be kept
aside which would be examined separately while dealing
with the issue as to whether there was a concluded contract
between the parties. This distinction is lucidly explained in
Kisan Sehkari Chini Mills & Ors. v. Vardan Linkers &
Ors.(2008) 12 SCC 500. Keeping in mind this distinction
between the two, we are not required to bring in the
contractual elements of the case while dealing with the
administrative law aspects.
x xxx x
23. The guiding principles in such cases can be noted from
the judgments discussed hereinafter.
24 In Meerut Development Authority v. Assn. of
Management Studies(2009) 6 SCC 171, the decision related
to disposal of public property by an instrumentality of the
State. In the said context, the Court inter alia held as follows:
―26. A tender is an offer. It is something which
invites and is communicated to notify acceptance.
Broadly stated it must be unconditional; must be in
the proper form, the person by whom tender is made
must be able to and willing to perform his obligations.
The terms of the invitation to tender cannot be
open to judicial scrutiny because the invitation to
tender is in the realm of contract. However, a
limited judicial review may be available in cases
where it is established that the terms of the invitation
to tender were so tailor made to suit the convenience
of any particular person with a view to eliminate all
others from participating in the biding process.
135
27. The bidders participating in the tender process
have no other right except the right to equality and fair
treatment in the matter of evaluation of competitive
bids offered by interested persons in response to
notice inviting tenders in a transparent manner and
free from hidden agenda. One cannot challenge the
terms and conditions of the tender except on the
above stated ground, the reason being the terms of
the invitation to tender are in the realm of the contract.
No bidder is entitled as a matter of right to insist the
authority inviting tenders to enter into further
negotiations unless the terms and conditions of notice
so provided for such negotiations.
x x x x
29. The Authority has the right not to accept the
highest bid and even to prefer a tender other than
the highest bidder, if there exist good and sufficient
reason, such as, the highest bid not representing the
market price but there cannot be any doubt that the
Authority's action in accepting or refusing the bid must
be free from arbitrariness or favouritism.‖
(emphasis supplied)
It is not for the court to determine whether a
particular policy or particular decision taken in the
fulfilment of that policy is fair. There are inherent
limitations in exercise of power of judicial review. The
Government is the guardian of the finances of the State. It
is expected to protect the financial interest of the State.
The right to refuse the lowest or any other tender is
always available to the Government. There can be no
infringement of Article 14 if the Government tries to get
the best person or the best quotation. The right to choose
cannot be considered to be an arbitrary power, is trite law
on the subject. In the case in hand, petitioner company
and respondent CVPP entered into negotiations, which,
however, could not conclude to the expectation of
136
petitioner company. The decision to cancel turnkey tender
and start fresh tender process by impugned tender
notices, cannot be said to be arbitrary, unreasonable and
mala fide. It would be beneficial to extract further
portion(s) of the above cited judgement hereunder:
―26. In Tejas Constructions and Infrastructure (P) Ltd. v.
Municipal Council, Sendhwa &Anr.;2012 (6) SCC 464, the
Court was dealing with the case of challenge to the awarding
of contract to the 2nd respondent in the writ petition on the
ground that he had not complied with eligibility requirements
in NIT. Paragraph 17 of that case reads as follows:
―17. In Raunaq International Ltd. v. IV.R. Construction
Ltd.(1999) 1 SCC 492, this Court reiterated the
principle governing the process of judicial review and
held that the writ court would not be justified in
interfering with commercial transaction in which the
State is one of the parties to the same except where
there is substantial public interest involved and in
cases where the transaction is mala fide.‖
27. In so far as argument of mala fides is concerned, apart
from bald averment, there are no pleadings and there is not
even a suggestion as to how the aforesaid decision was
actuated with malafides and on whose part. Even at the time
of arguments Mr. Vikas Singh did not even advert to this
aspect. In fact, the entire emphasis of Mr. Vikas Singh was
that since there was a concluded contract between the
parties, cancellation of such a contract amounted to
arbitrariness. As already pointed out above that can hardly
be a ground to test the validity of a decision in administrative
law. For the sake of argument, even if you presume that
there a concluded contract, mere termination thereof
cannot be dubbed as arbitrary. A concluded contract if
terminated in a bona fide manner, that may amount to
breach of contract and certain consequences may
follow thereupon under the law of contract.........
28. We, therefore, reject this contention of the appellant.‖
(Emphasis supplied)
63. The Supreme Court has made it clear that even if it is
presumed that there is a concluded contract, its
termination cannot be labelled as arbitrary because if a
contract is terminated in a bona fide manner, such
termination may amount to breach of contract and the
137
consequences therefrom would follow under the law of
contract. The Supreme Court on the issue of ―legitimate
expectation‖, as is one of the issues/points raised by
learned senior counsel for petitioner for seeking the relief
beseeched in the writ petition, has made following
illustrious observations:
―29. Again, we clarify at the outset that even the principle of
promissory estoppel is in the field of administrative law and
while entertaining the arguments and discussion on this
issue, the question Has to whether there was a concluded
contract or not as to be kept aside. Precisely this was done
in Kisan Sehkari Chini Mills Case (Supra). The Court dealt
with the issue of legitimate expectation etc. separating it
from the issue pertaining to concluded contract and made
following pertinent observation in the process:
―23. If the dispute was considered as purely one
relating to existence of an agreement, that is whether
there was a concluded contract and whether the
cancellation and consequential non-supply amounted
to breach of such contract, the first respondent ought
to have approached the civil court for damages. On
the other hand, when a writ petition was filed in regard
to the said contractual dispute, the issue was whether
the Secretary (Sugar), had acted arbitrarily or
unreasonably in staying the operation of the allotment
letter dated 26.3.2004 or subsequently cancelling the
allotment letter. In a civil suit, the emphasis is on
the contractual right. In a writ petition, the focus
shifts to the exercise of power by the authority,
that is, whether the order of cancellation dated
24.4.2004 passed by the Secretary (Sugar), was
arbitrary or unreasonable. The issue whether there
was a concluded contract and breach thereof
becomes secondary. In exercising writ jurisdiction,
if the High Court found that the exercise of power
in passing an order of cancellation was not
arbitrary and unreasonable, it should normally
desist from giving any finding on disputed or
complicated questions of fact as to whether there
was a contract, and relegate the petitioner to the
remedy of a civil suit. Even in cases where the High
Court finds that there is a valid contract, if the
impugned administrative action by which the
contract is cancelled, is not unreasonable or
arbitrary, it should still refuse to interfere with the
same, leaving the aggrieved party to work out his
remedies in a civil court. In other words, when
there is a contractual dispute with a public law
138
element, and a party chooses the public law
remedy by way of a writ petition instead of a
private law remedy of a suit, he will not get a full
fledged adjudication of his contractual rights, but
only a judicial review of the administrative action.
The question whether there was a contract and
whether there was a breach may, however, be
examined incidentally while considering the
reasonableness of the administrative action. But
where the question whether there was a contract, is
seriously disputed, the High Court cannot assume
that there was a valid contract and on that basis,
examine the validity of the administrative action.
24. In this case, the question that arose for
consideration in the writ petition was whether the
order dated 24.4.2004 passed by the Secretary
(Sugar), cancelling the allotment letter dated
26.3.2004 was arbitrary and irrational or violative of
any administrative law principles. The question
whether there was a concluded contract or not, was
only incidental to the question as to whether
cancellation order dated 24.4.2004 by the Secretary
(Sugar), was justified. As the case involved several
disputed questions in regard to the existence of
the contract itself, the High Court ought to have
referred the first respondent to a civil court. But
the High Court in exercise of its writ jurisdiction,
proceeded as if it was dealing with a pure and
simple civil suit relating to breach of contract.‖
(Emphasis supplied)
64. It would be suitable to discuss and settle the other
ground/issue raised by learned senior counsel for
petitioner as to ―legitimate expectation‖ herein now, while
dealing with other issues as well, simultaneously.
65. Learned senior counsel for petitioner has stated that the
impugned decision cancelling the tender is exercise of
mala fide power, arbitrary, unreasonable and defeats
rights of petitioner, apart from being violative of doctrine
of legitimate expectation, and that in view of course of
events, ever since tenders were submitted, negotiations
139
held, discounts granted and other benefits agreed to and
allowed in favour of respondent No.1, petitioner company
had legitimate expectation that the contract would be
allotted to it. Petitioner company was asked to keep
validity of its bid and security document alive throughout
this period, which further lends support to the
expectations of petitioner company that the contract
would be allotted to it. Impugned action of respondent
No.1 violates doctrine of legitimate expectation. It is
inequitable on part of respondent No.1 to have cancelled
tender to the prejudice and detriment of petitioner
company.To this contention, learned senior counsel
appearing for respondent CVPP has stated that as is
evident and apparent from facts of the case as
enumerated by petitioner company in its writ petition, it is
nowhere remotely inferable that any mala fide on part of
respondent or its Directors. Despite being lowest bidder,
no right is vested with petitioner No.1 consortium to claim
award of contract and that respondent has never
communicated to petitioner company that contract will be
awarded to it. The plea of legitimate expectation of
petitioner in the present case is not attracted.
66. It is pertinent to mention here that once parties enter into
contract, they are bound by terms and conditions of the
140
said contract. In the present case, parties are even yet to
reach that stage, where it would be said that any formal
letter, communication or order was made in the name of
petitioner company, intimating itqua allotment of contract.
The meeting(s) and negotiation(s), between respondent
CVPP and petitioner company or any inter se
communications of respondent CVPP or internal
meeting(s) of respondent CVPP, concerning rates offered
by petitioner company, will not per se be construed or
interpreted extending any promise by respondent CVPP
to petitioner company, inasmuch as there was no formal
allotment order issued by respondent CVPP in favour of
petitioner.
67. On the legitimate expectation, the Supreme Court in A.P.
Transco Vs. Sai Renewable Power (P) Ltd.39, while
considering the doctrine of legitimate expectation with
reference to various communications extending certain
incentives to producers of electricity from non-
conventional energy resources, held that the parties had
voluntarily signed the Power Purchase Agreements, by
which they were governed and neither the doctrine of
promissory estoppel nor legitimate expectation could,
therefore, have any application in regard to the
39
(2011]) 11 SCC 34
141
correspondences exchanged between the parties,
whereby the Government had extended certain incentives
to the producers of electricity from non-conventional
energy resources.
68. The same doctrine had been considered by the Supreme
Court in Bannari Amman Sugars Ltd. Vs. Commercial
Tax Officer40; State of Himachal Pradesh Vs. Ganesh
Wood Products41; Kasinka Trading Vs. Union of
India42 and Sethi Auto Service Station Vs. D.D.A43.
69. The protection of legitimate expectations as pointed out in
De Smiths Judicial Review (Sixth Edition) (para 12-001) is
at the root of the constitutional principle of the rule of law,
which requires regularity predictability and certainty in
governments dealings with the public. The doctrine of
legitimate expectation and its impact in the administrative
law has been considered by the Courts in a catena of
decisions but in order to avoid prolixity all these cases are
not referred here. Nonetheless, with the purpose of
appreciation of the concept a few decisions are referred
and discussed. Let me refer to a decision delivered by the
House of Lords in Council of Civil Service Unions &
40
(2005) 1 SCC 625
41
(1995) 6 SCC 363
42
(1995) 1 SCC 274
43
(2009) 1 SCC 180
142
Ors. Vs. Minister for the Civil Service44, an authoritative
and often-quoted judgement on the subject. In the said
case it was for the first time that an attempt was made to
give an inclusive definition to the principle of legitimate
expectation. Enunciating the basic principles relating to
legitimate expectation, Lord Diplock observed that for a
legitimate expectation to arise the decision of the
administrative authority must affect such person either (a)
by altering rights or obligations of that person which are
enforceable by or against him in private law or (b) by
depriving him of some benefit or advantage which either:
(i) he has in the past been permitted by the decision
maker to enjoy and which he can legitimately expect to be
permitted to continue to do until some rational ground for
withdrawing it has been communicated to him and he has
been given an opportunity to comment thereon or (ii) he
has received assurance from the decision-maker that they
will not be withdrawn without first giving him an
opportunity of advancing reasons for contending that they
should be withdrawn.
70. In Attorney General of Hong Kong Vs. Ng Yuen Shiu45,
a leading case on the subject, Lord Fraser said ―when a
44
[1984] 3 All ER 935
45
(1983) 2 All.ER 346
143
public authority has promised to follow a certain
procedure it is in the interest of good administration that it
should act fairly and should implement its promise so long
as the implementation does not interfere with its statutory
duty‖.
71. Explaining the nature and scope of the doctrine of
legitimate expectation a three-Judge Bench of the
Supreme Court in Food Corporation of India Vs. M/s.
Kamdhenu Cattle Feed Industries46, had observed thus:
―The mere reasonable or legitimate expectation of a citizen
in such a situation may not by itself be a distinct
enforceable right but failure to consider and give due
weight to it may render the decision arbitrary and this is
how the requirement of due consideration of a legitimate
expectation forms part of the principle of non-arbitrariness
a necessary concomitant of the rule of law. Every
legitimate expectation is a relevant factor requiring due
consideration in a fair decision-making process. Whether
the expectation of the claimant is reasonable or legitimate
in the context is a question of fact in each case. Whenever
the question arises it is to be determined not according to
the claimants perception but in larger public interest
wherein other more important considerations may outweigh
what would otherwise have been the legitimate expectation
of the claimant. A bona fide decision of the public authority
reached in this manner would satisfy the requirement of
non-arbitrariness and withstand judicial scrutiny. The
doctrine of legitimate expectation gets assimilated in the
rule of law and operates in our legal system in this manner
and to this extent.‖
72. The concept of legitimate expectation again came up for
consideration in Union of India & Ors. Vs. Hindustan
Development Corporation & Ors47. Referring to a large
number of foreign and Indian decisions including in
46
(1993) 1 SCC 71
47
(1993) 3 SCC 499
144
Council of Civil Service Unions and Kamdhenu Cattle
Feed Industries (supra) and elaborately explicating
concept of legitimate expectation, it was observed:
―If a denial of legitimate expectation in a given case
amounts to denial of right guaranteed or is arbitrary
discriminatory unfair or biased gross abuse of power or
violation of principles of natural justice the same can be
questioned on the well-known grounds attracting Article 14
but a claim based on mere legitimate expectation without
anything more cannot ipso facto give a right to invoke
these principles. It can be one of the grounds to consider
but the court must lift the veil and see whether the decision
is violative of these principles warranting interference. It
depends very much on the facts and the recognised
general principles of administrative law applicable to such
facts and the concept of legitimate expectation which is the
latest recruit to a long list of concepts fashioned by the
courts for the review of administrative action must be
restricted to the general legal limitations applicable and
binding the manner of the future exercise of administrative
power in a particular case. It follows that the concept of
legitimate expectation is not the key which unlocks the
treasury of natural justice and it ought not unlock the gate
which shuts the court out of review on the merits
particularly when the element of speculation and
uncertainty is inherent in that very concept.‖
73. Taking note of the observations of the Australian High
Court in Attorney General for New South Wales Vs.
Quinn48 that ―to strike down the exercise of administrative
power solely on the ground of avoiding disappointment of
legitimate expectations of an individual would be to set
the Courts adrift on a featureless sea of pragmatism‖,
speaking for the Bench, K. Jayachandra Reddy J. said
that there are stronger reasons as to why the legitimate
expectation should not be substantively protected than
the reasons as to why it should be protected. The caution
48
(1990) 64 Aust LJR 327
145
sounded in the said Australian case that the Courts
should restrain themselves and restrict such claims duly
to the legal limitations, was also endorsed.
74. A three Judge Bench of the Supreme Court again in
National Buildings Construction Corporation Vs. S.
Raghunathan & Ors.49, observed:
―The doctrine of legitimate expectation has its genesis in the
field of administrative law. The Government and its
departments in administering the affairs of the country are
expected to honour their statements of policy or intention
and treat the citizens with full personal consideration without
any iota of abuse of discretion. The policy statements cannot
be disregarded unfairly or applied selectively. Unfairness in
the form of unreasonableness is akin to violation of natural
justice. It was in this context that the doctrine of legitimate
expectation was evolved which hastoday become a source
of substantive as well as procedural rights. But claims based
on legitimate expectation have been held to require reliance
on representations and resulting detriment to the claimant in
the same way as claims based on promissory estoppel.‖
75. In Punjab Communications Ltd. Vs. Union of India &
Ors.50, the Supreme Court, after referring to a large
number of authorities on the question, observed that a
change in policy can defeat a substantive legitimate
expectation if it can be justified on Wednesbury
reasonableness. The decision maker has the choice in
the balancing of the pros and cons relevant to the change
in policy. Therefore the choice of the policy is for the
decision maker and not for the Court. The legitimate
substantive expectation merely permits the Court to find
49
(1998) 7 SCC 66
50
(1999) 4 SCC 727
146
out if the change in policy which is the cause for defeating
the legitimate expectation is irrational or perverse or one
which no reasonable person could have made.
76. The Supreme Court in Jitendra Kumar & Ors. Vs. State
of Haryana & Anr.,51 has reiterated that a legitimate
expectation is not the same thing as an anticipation. It is
distinct and different from a desire and hope. It is based
on a right. It is grounded in the rule of law as requiring
regularity predictability and certainty in the Governments
dealings with the public and the doctrine of legitimate
expectation operates both in procedural and substantive
matters.
77. An examination of the afore-noted decisions shows that
the golden thread running through all these decisions is
that a case for applicability of the doctrine of legitimate
expectation, now accepted in the subjective sense as part
of our legal jurisprudence, arises when an administrative
body by reason of a representation or by past practice or
conduct aroused an expectation, which it would be within
its powers to fulfil, unless some overriding public interest
comes in the way. However a person, who bases his
claim on the doctrine of legitimate expectation in the first
51
(2008) 2 SCC 161
147
instance, has to satisfy that he has relied on the said
representation and the denial of that expectation has
worked to his detriment. The Court could interfere only if
the decision taken by the authority was found to be
arbitrary, unreasonable or in gross abuse of power or in
violation of principles of natural justice and not taken in
public interest. But a claim based on mere legitimate
expectation cannot ipso facto give a right to invoke these
principles. It is well settled that the concept of legitimate
expectation has no role to play where the State action is
as a public policy or in the public interest unless the
action taken amounts to an abuse of power. In Hindustan
Development Corporation case (supra) it was pointed
out that the court must not usurp the discretion of the
public authority, which is empowered to take the
decisions under law and the court is expected to apply an
objective standard which leaves to the deciding authority
the full range of choice which the legislature is presumed
to have intended. Even in a case where the decision is
left entirely to the discretion of the deciding authority
without any such legal bounds and if the decision is taken
fairly and objectively, the court will not interfere on the
ground of procedural fairness to a person whose interest
based on legitimate expectation might be affected.
148
Therefore, a legitimate expectation can at the most be
one of the grounds which may give rise to judicial review
but the granting of relief is very much limited.
78. It may not be out of place to mention here that the
doctrine of legitimate expectation is not applicable in the
instant case inasmuch as there is no foundation for such
a claim. The negotiations held between petitioner
company and respondent CVPP, cannot, per se, be
treated or termed as if it were formal allotment. In Sethi
Auto Service Station case (supra), the doctrine of
legitimate expectation had been considered, where
appellant's claim was based on an old policy and it was
held that Appellant merely had an expectation for being
considered for resitement. It was also held that a person,
basing his claim on doctrine of legitimate expectation, has
to establish that he had relied on said representation and
had altered his position and that denial of such
expectation worked to his detriment.
79. The Courts can interfere only if the decision taken by the
authority is found to be arbitrary, unreasonable or in gross
abuse of power or in violation of principles of natural
justice and contrary to public interest. It is also reiterated
here that the concept of legitimate expectation has no role
149
to play where the said action is a matter of public policy or
in the public interest, unless, of course, the action taken
amounts to an abuse of power. The Supreme Court has
further emphasized that in order to establish a claim of
promissory estoppel, it must be proved that there was
such a definite promise and not any vague offer which
could not been forced. In this regard learned senior
counsel appearing for respondent CVPP, submits and
rightly so, that the reliance placed on minutes of
meeting(s) and inter se letters by learned senior counsel
for petitioner, stated to have been issued or addressed by
respondent CVPP, is of no avail as any word or
expression made in such letter(s) or meeting(s) does not
constitute a promise that could be made enforceable and
obligatory for respondent CVPP to issue formal allotment
order in favour of petitioner. Mr Sethi, for that reason,
submits that writ petition is liable to be dismissed.
80. As will be evident from record and submissions made on
behalf of parties, the case of petitioner is based on
doctrine of legitimate expectation, and not on promise
made by respondent CVPP to petitioner that he would be
granted contract. From the facts as disclosed, there is
evidence on record to indicate that negotiations with
petitioner and meeting(s) were held by respondent CVPP,
150
and inter se communications were made by respondent
CVPP. However, we should not lose sight of the fact that
whatever exercise undertaken by respondent CVPP,
during negotiations with petitioner company or during its
internal meetings, the same would not by itself confer any
right upon petitioner company to say that concluded
contract was entered into between parties and if so,
question of enforcement of such a contract would be in
the field of law of contract, inasmuch as there was no
formal contract made or any communication made or
issued in this regard by respondent CVPP in favour of
petitioner company.
81. I am inclined to hold that the doctrine of legitimate
expectation or for that matter promissory estoppel, as
canvassed on behalf of petitioner, cannot be made
applicable to this case. The decisions cited on behalf of
learned counsel for petitioner, are not, therefore, relevant
for a decision in this case.
82. Mere meetings or correspondences cannot be construed
as a promise extended by respondent CVPP to petitioner
company to arrest them from rejecting the offer/bid of
petitioner company. Further to say again here that mere
reliance on intraoffice noting(s), agenda notes, meetings
151
references and communications of respondent CVPP, is
misplaced and against settled principles of law reiterated
by the Supreme Court in a catena of judgments. In Sethi
Auto Service Station case (supra) the Supreme Court
has held that notings in a departmental file do not have
the sanction of law to be an effective order. A noting by
an officer is an expression of his viewpoint on the subject.
Notings in the file culminate into an executable order,
affecting the rights of the parties, only when it reaches the
final decision-making authority in the department, gets his
approval and the final and formal order of allotment is
communicated to the person concerned. Reliance is also
placed on Union of India v. Vartak Labour Union (2)52;
State of Bihar v. Kripalushanker53; and Jasbir Singh
Chhabra v. State of Punjab54, in this regard. Having said
so, it would be safe to say that writ petition is without any
merit.
83. Learned senior counsel for petitioner has also placed
reliance on Tata Cellular case (supra). The said citation
has already been discussed in Maa Binda Express
Carrier case (supra).
52
(2011) 4 SCC 200
53
(1987) 3 SCC 34
54
(2010) 4 SCC 192
152
84. Ramana Dayaram Shetty v. International Airport
Authority of India and others55 has also been relied
upon by learned senior counsel for petitioner. The said
case relates to challenge thrown to allotment/award of
contract to an ineligible tenderer and the doctrine(s)
connected therewith. The cited judgement also discusses
Article 12, Constitution of India and its application. The
judgment also refers to observation of Douglas, J., in New
York v. United States case (supra) that ―A State's project
is as much a legitimate governmental activity whether it is
traditional or akin to private enterprise, or conducted for
profit",and that a State may deem it as essential to its
economy that it owns and operates a railroad, a mill, or an
irrigation system as it does, to own and operate bridges,
streetlights, or a sewage disposal plant. What might have
been viewed in an earlier day as an improvident or even
dangerous extension of the State activities may today be
deemed indispensable. Besides so-called traditional
functions, modern State operates a multitude of public
enterprises and discharges a host of other public
functions. If the functions of the corporation are of public
importance and closely related to governmental functions,
it would be a relevant factor in classifying the corporation
55
(1979) 3 SCC 489
153
as an instrumentality or agency of Government. Hence,
cited judgement relates to controversy of post-contract
stage and not pre-contract stage.In the cited judgment,
one of the decisions of the Supreme Court, which is
counterproductive to present case of petitioner, in C.K.
Achuthan v. State of Kerala56 was discussed. The facts
of the said case were that the petitioner therein and the
3rd respondent, Co-operative Milk Supply Union,
Cannanore, submitted tenders for supply of milk to
Government Hospital at Cannanore, for the year 1948-49.
Superintendent, who scrutinised tenders accepted that of
petitioner and communicated reasons for decision to
Director of Public Health. The contract in favour of
petitioner was, however, subsequently cancelled, by
issuing a notice in view of the policy of the Government
that in the matter of supply to Government Medical
Institutions, the Co-operative Milk Supply Union should be
given contract on the basis of prices filed by Revenue
Department. The petitioner challenged the said decision
in a petition on the grounds, inter alia, that there had been
discrimination against him vis-à-vis 3rd respondent and
as such, there was contravention of Article 14 of the
Constitution. The Constitution Bench of the Supreme
56
1959 Supp 1 SCR 878: AIR 1959 SC 490
154
Court rejected this contention of the petitioner and while
doing so, Hidayatullah, J., observed that "There is no
discrimination, because it is perfectly open to the
Government, even as it is to a private party, to choose a
person to their liking, to fulfil contracts which they wish to
be performed. When one person is chosen rather than
another, the aggrieved party cannot claim the protection
of Article 14, because the choice of the person to fulfil a
particular contract must be left to the Government." In the
cited judgement, another decision of the Supreme Court
in State of Orissa v. Harinarayan Jaiswal & ors57,was
discussed. In the said case respondents were highest
bidders at an auction held by the Orissa Government
through Excise Commissioner for exclusive privilege of
selling by retail country liquor in some shops. The
Government of Orissa did not accept any of the bids
made at the auction and subsequently sold the privilege
by negotiations with some other parties. One of the
contentions raised on behalf of writ petitioners in that
case was that power retained by the Government "to
accept or reject any bid without any reason therefor", as is
projected by petitioner in the present case, was an
arbitrary power, violative of Articles 14 and 19(1)(g). This
57
(1971) 3 SCC 153
155
contention was negatived and Hegde, J. speaking on
behalf of the Court observed that "The Government is the
guardian of the finances of the State. It is expected to
protect the financial interest of the State. Hence quite
naturally, the legislature has empowered the Government
to see that there is no leakage in its revenue. It is for the
Government to decide whether the price offered in on
auction sale is adequate. While accepting or rejecting a
bid, it is merely performing an executive function. The
correctness of its conclusion is not open to judicial review.
We fail to see how the plea of contravention of Article
19(1)(g) or Article 14 can arise in these cases. The
Government's power to sell the exclusive privilege set out
in section 22 was not denied. It was also not disputed that
these privileges could be sold by public auction. Public
auctions are held to get the best possible price. Once
these aspects are recognised, there appears to be no
basis for contending that the owner of the privileges in
question who had offered to sell them cannot decline to
accept the highest bid if he thinks that the price offered is
inadequate." The Supreme Court, after quoting the above
observations made in State of Orissa v. Harinarayan
Jaisal case (supra), observed in the cited judgment
(Raman Dayaram Shetty v. International Airport Authority)
156
that it ―will be seen from these observations that the
validity of clause (6) of the order.... was upheld by the
Court on the ground that having regard to the object of
holding the auction, namely, to raise revenue, "the
Government was entitled to reject even the highest bid, if
it thought that the price offered was inadequate. The
Government was not bound to accept the tender of the
person who offered the highest amount and if the
Government rejected all the bids made at the auction, it
did not involve any violation of Article 14 or 19(1)(g).‖ The
said case, as reiterated above, is totally different from the
case in hand. In the cited case, tender was accepted of a
person, who was not fulfilling the conditions/eligibility of
the tender notice.
85. Air India ltd. v. Cochin International Airport Ltd. and
otherscase (supra). The facts of the cited judgement
deserve to be talked about here. Cochin International
Airport Limited (CIAL) invited offers, by writing letters to
some companies for awarding a contract for ground
handling facilities at the new Airport. The letters were
written to Cambatta Aviation Limited (Cambatta), Air
India, and six others. The Committee, constituted by
CIAL, took note of the fact of Cambatta and Air India
being Indian organisations, operate mainly in India and
157
having better proven adaptability for operating in Indian
conditions. Out of those two, it recommended Cambatta
for awarding the work. The Government of India wrote a
letter to the Government of Kerala, recommending Air
India for awarding contract on the ground that Air India is
national carrier and has better experience. Thereafter, a
meeting took place between the Managing Director of Air
India and the Chief Minister of Kerala. That was followed
by a letter by Managing Director of Air India to the Chief
Minister of Kerala, seeking an opportunity to make a more
detailed presentation to the Board of CIAL. The Board of
Directors decided to have a detailed discussion with Air
India, before taking a final decision and informed it to give
a presentation before the Board. Having come to know
about this development, Cambatta wrote a letter to the
Chief Minister of Kerala, pointing out that their company is
also an Indian company and they also have experience of
over 30 years in ground handling work. Cambatta again
protested and informed CIAL that acceptance of revised
offer of Air India and not to accept Cambatta's offer would
be unfair and unethical and violative of Limited Global
Competitive Building Norms. But the first respondent
awarded the contract to Air India. Thereagainst, Cambatta
filed a writ petition in the Kerala High Court. Cambata's
158
contention was that its offer was highest and it had
fulfilled all conditions. The offer given by Air India did not
come anywhere near their offer, yet the contract was
given to Air India because of influence exerted by Air
India and Secretary of Ministry of Civil Aviation. It was
also challenged on the ground that CIAL had not acted
fairly and impartially as it had carried on negotiations with
Air India behind the back of Cambatta and no opportunity
was given to Cambatta to give a better offer. The petition
was heard by a learned Single Judge of the High Court
who held that there was no illegality, arbitrariness or
unreasonableness in the decision making process of
CIAL and the decision taken was bona fide after
evaluating both the offers and on being satisfied that in
the matter of experience, expertise, infrastructure and
financial capacity the offer of Air India was superior and
more beneficial. As regards the allegation of actual mala
fides, learned single Judge held that the pleading in that
behalf was very vague and scanty.
The matter went in appeal. The Division Bench held
that it was a case of public tender. It also held that though
the decision of evaluation committee was only
recommendatory and not binding on the Board of
Directors of CIAL, the fact that evaluation committee had
159
considered all relevant aspects and found Cambatta as
most competent party and yet no reasons were disclosed
for explaining what prompted the Board of Directors to
take a different view, which was clearly indicative of the
fact that CIAL was influenced in its decision making
process by Air India and Secretary of the Ministry of Civil
Aviation. Challenging this decision of the High Court, Air
India and CIAL knocked at portals of the Supreme Court,
which resulted in passing of the cited judgment of learned
senior counsel for petitioner.
The Supreme Court said : ―The law relating to
award of a contract by the State, its corporations and
bodies acting as instrumentalities and agencies of the
Government has been settled by the decision of this
Court in R. D. Shetty v. International Airport Authority
1979 (3) SCC 488), Fertilizer Corporation Kamgar Union
v. Union of India 1981 (1) SCC 568 ), Assistant Collector,
Central Excise v. Dunlop India Ltd. 1985 (1) SCC 260 =
1984 (2) SCALE 819), Tata Cellular v. Union of India
1994 (6) SCC 651 = 1995 (1) Arb. LR 193), Ramniklal N.
Bhutta v. State of Maharashtra 1997 (1) SCC 134 = 1996
(8) SCALE 417), and Raunaq International Ltd. v. I.V.R.
Construction Ltd. 1999 (1) SCC 492 = 1999 (1) Arb. LR
431 (SC). The award of a contract, whether it is by a
160
private party or by a public body or the State, is
essentially a commercial transaction. In arriving at a
commercial decision considerations which are of
paramount are commercial considerations. The State can
choose its own method to arrive at a decision. It can fix its
own terms of invitation to tender and that is not open to
judicial scrutiny. It can enter into negotiations before
finally deciding to accept one of the offers made to it.
Price need not always be the sole criterion for awarding a
contract. It is free to grant any relaxation, for bona fide
reasons, if the tender conditions permit such a relaxation.
It may not accept the offer even though it happens to be
the highest or the lowest. But the State, its corporations,
instrumentalities and agencies are bound to adhere to the
norms, standards and procedures laid down by them and
cannot depart from them arbitrarily. Though that decision
is not amenable to judicial review, the Court can examine
the decision making process and interfere if it is found
vitiated by mala fides, unreasonableness and
arbitrariness. The State, its corporations, instrumentalities
and agencies have the public duty to be fair to all
concerned. Even when some defect is found in the
decision making process the Court must exercise its
discretionary power under Article 226 with great caution
161
and should exercise it only in furtherance of public
interest and not merely on the making out of a legal point.
The Court should always keep the larger public interest in
mind in order to decide whether its intervention is called
for or not. Only when it comes to a conclusion that
overwhelming public interest requires interference, the
Court should intervene‖.
After making the above discussions, what is
important to be seen is, that what the Supreme Court
observed, held and concluded in the above cited
judgment, which is necessary to be quoted below with
emphasis supplied, inasmuch as the same gives befitting
answer to all queries that petitioner has posed before this
Court in the case in hand:
―11. This narration of facts makes it clear that all along, after
the High Level Committee had recommended Cambatta for
awarding the contract, what Cambatta was contending was
that CIAL having accepted the limited global competitive
bidding norms and having decided 28-7-1998 as the last
date for inviting final offer, it was not open to it thereafter to
negotiate with Air India behind the back of Cambatta and
permit Air India to revise its offer. Even though Cambatta
had written protest letters, it had not requested CIAL to give
it any opportunity to negotiate or to improve upon its offer.
The decision of the High Level Committee was
obviously not the final decision and certainly it was not
binding on the Board of Directors who were the final
authority to take the decision. The Board of Directors, at
the meeting held on 7-11-1998, considered the
proposals of Air India and Cambatta..... and, therefore,
called it for negotiations with a view to have better terms
and take the final decision. The Board of Directors did
take the final decision on 27-11-1998 as Air India agreed
to make its offer more beneficial to CIAL. That becomes
apparent from Air India's letter dated 1-12-1998. The Board
of Directors having taken tentative decision on 7-11-1998
there was no point in calling Cambatta thereafter for any
162
negotiation. It may be recalled that Cambatta was
recommended over Air India by the High Level Committee
only because Cambatta's financial rating was found higher.
What is significant to note is that even the High Level
Committee had in its minutes noted that financial rating
cannot be the sole criterion for taking the final decision.
Moreover, in a commercial transaction of such a
complex nature a lot of balancing work has to be done
while weighing all the relevant factors and the final
decision has to be taken after taking an overall view of
the transaction.....
12. ....As regards the merits of the rival offers, we do not
think it proper to look at only the financial aspect and
hold that CIAL did not accept Cambatta's offer, even
though it was better, because it wanted to favour Air India
or that it had acted under the influence of Air India and
the Ministry of Civil Aviation. In a commercial
transaction of a complex naturewhat may appear to be
better, on the face of it, may not be considered so when
an overall view is taken. In such matters the Court
cannot substitute its decision for the decision of the party
awarding the contract. On the basis of the material placed on
record we find that CIAL bona fide believed that involving a
public sector undertaking and a national carrier would, in the
long run, prove to be more beneficial to CIAL. For all these
reasons it is not possible to agree with the finding of the High
Court that CIAL had acted arbitrarily and unreasonably
and was also influenced by extraneous considerations
during its decision making process.
13. We, therefore, allow these two appeals, set aside the
judgment of the Division Bench of the Kerala High Court in
Writ Appeal No. 462 of 1999 and confirm the decision of the
learned Single Judge in O.P. No. 25560 of 1998.‖
(emphasis supplied)
The above quoted observations and conclusions
drawn by the Supreme Court in the aforementioned
judgment,cited by learned senior counsel for petitioner
and the emphasis supplied thereto, provide a lot vis-à-vis
the case in hand. First part thereof is that the decision/
recommendation(s) of the Evaluation Committee(s) or for
that matter of High Level Committee(s), as has been
projected by petitioner in the case in hand as well, would
not inhibit the authority of Board of Directors to take a
163
decision contrary to recommendations/decisions of
Evaluation Committee and/or High Level Committee.
Second important part of the cited judgment is that the
decision whatever taken by CIAL, as in the instant case is
CVPP, is aiming at to be more beneficial for CIAL.
Subsequent important part of the cited judgement is that
in a commercial transaction of such a complex nature a
lot of balancing work has to be done while weighing all
the relevant factors and the final decision, as has been
taken by respondent CVPP in the present case as well,
has to be taken after taking an overall view of the
transaction.
Further aspect of the above quoted conclusions
drawn by the Supreme Court are that in a commercial
transaction of a complex nature what may appear to be
better, on the face of it, may not be considered so, when
an overall view is taken. In such matters the Court cannot
substitute its decision for the decision of the party
awarding the contract. In the present case, respondent
CVPP has not awarded contract to any other company,
but entered into negotiations with petitioner
company.However, the same did not yield any result as
was expected by respondent CVPP or for that matter by
petitioner company. And as a consequence thereof,
164
respondent CVPP, in its apex body meeting, decided to
cancel the turnkey execution tender and start fresh tender
process by inviting package mode instead of turnkey
mode. In such circumstances, the decision taken by
respondent CVPP, impugned in the writ petition on hand,
cannot be held arbitrary, unreasonable or mala fides,
muchless influenced by extraneous consideration during
its decision making process.
86. Though the submission of learned senior counsel for
petitioner as regards ―legitimate expectation‖ has been
discussed herein above, yet it would be proper to go
through and discuss the judgements cited by him here.
The first judgment cited by learned senior counsel is of
the Supreme Court in Union of India and another v.
International Trading Co. and another58. It is apt to
mention here that the cited judgment is again deeply
weakening the case of petitioner. The referred judgment
relates to the case of non-renewal of permit under the
provisions of Maritime Zones of India (Regulation of
Fishing by Foreign Vessels) Act, 1981 and the Maritime
Zones of India (Regulation of Fishing by Foreign Vessels)
Rules, 1982. The Delhi High Court held that renewal of
the permit was a valuable right and that policy decision
58
(2003) 5 SCC 437
165
which is contrary to the Statute cannot be upheld. The
authorities were directed to pass appropriate order on the
prayer for renewal of the permit. The Delhi High Court
also concluded that though licence was not granted for 15
years, there had been a legitimate expectation that
renewal would be granted. The Supreme Court, when the
matter came up before it, observed that doctrine of
promissory estopped and legitimate expectation cannot
come in the way of public interest and indisputably, public
interest has to prevail over private interest. The Supreme
Court went further ahead by holding that it cannot be said
that the respondents have acquired any right for renewal
and that the High Court was not justified in observing that
the policy decision was contrary to the Statute and that a
claim based on mere legitimate expectation without
anything more cannot ipso facto give a right to invoke the
principles. It can be one of the grounds to consider, but
the court must lift the veil and see whether the decision is
violative of these principles warranting interference. It
depends very much on the facts and the recognized
general principles of administrative law applicable to such
facts and the concept of legitimate expectation which is
the latest recruit to a long list of concepts fashioned by
the courts for the review of administrative action must be
166
restricted to the general legal limitations applicable and
binding the manner of the future exercise of
administrative power in a particular case. It follows that
the concept of legitimate expectation is 'not the key which
unlocks the treasure of natural justice and it ought not to
unlock the gates which shuts the court out of review on
the merits', particularly, when the element of speculation
and uncertainty is inherent in that very concept. It would
be useful to extract relevant portion(s) of the judgment
herein below, with emphasis supplied:
―21. As observed in Attorney General for New South wales
v. Quin [1990 (64) Australian LJR 327) to strike the
exercise of administrative power solely on the ground of
avoiding the disappointment of the legitimate expectations
of an individual would be to set the courts adrift on a
featureless sea of pragmatism. Moreover, the negotiation
of a legitimate expectation (falling short of a legal right) is
too nebulous to form a basis for invalidating the exercise of
a power when its exercise otherwise accords with law; If a
denial of legitimate expectation in a given case amounts to
denial of right guaranteed or is arbitrary, discriminatory,
unfair or biased gross abuse of power or violation of
principles of natural justice, the same can be questioned
on the well known grounds attracting Article 14 but a claim
based on mere legitimate expectation without anything
more cannot ipso facto give a right to invoke these
principles. It can be one of the grounds to consider, but
the court must lift the veil and see whether the decision is
violative of these principles warranting interference. It
depends very much on the facts and the recognized
general principles of administrative law applicable to such
facts and the concept of legitimate expectation which is the
latest recruit to a long list of concepts fashioned by the
courts for the review of administrative action must be
restricted to the general legal limitations applicable and
binding the manner of the future exercise of administrative
power in a particular case. It follows that the concept of
legitimate expectation is 'not the key which unlocks
the treasure of natural justice and it ought not to
unlock the gates which shuts the court out of review
on the merits', particularly, when the element of
speculation and uncertainty is inherent in that very
concept. As cautioned in Attorney General for New
167
Southwale's case the Court should restrain themselves
and respect such claims duly to the legal limitations. It
is a well-meant caution. Otherwise, a resourceful
litigant having vested interest in contract, licences, etc.
can successfully indulge in getting welfare activities
mandated by directing principles thwarted to further
his own interest. The caution, particularly in the changing
scenario becomes all the more important.
22. If the State acts within the bounds of reasonableness, it
would be legitimate to take into consideration the national
priorities and adopt trade policies. As noted above, the
ultimate test is whether on the touchstone of
reasonableness the policy decision comes out unscathed.
24. Reasonableness of restriction is to be determined
in an objective manner and from the standpoint of
interests of the general public and not from the
standpoint of the interest of persons upon whom the
restrictions have been imposed or upon abstract
consideration. A restriction cannot be said to be
unreasonable merely because in a given case, it
operates harshly. In determining whether there is any
unfairness involved; the nature of the right alleged to have
been infringed the underlying purpose of the restriction
imposed, the extent and urgency of the evil sought to be
remedied thereby, the disproportion of the imposition, the
prevailing condition at the relevant time, enter into judicial
verdict. The reasonableness of the legitimate expectation
has to be determined with respect to the circumstances
relating to the trade or business in question. Cancalization
of a particular business in favour of even a specified
individual is reasonable where the interests of the country
are concerned or where the business affects the economy
of the country. (See Parbhani Transport Co-operative
Society Ltd. v. The Regional Transport Authority,
Aurangabad and Ors. (AIR 1960 SC 801 : 62 Bom LR
521); Shree Meenakshi Mills Ltd. v. Union of India (1974) 1
SCC 468: AIR 1974 SC 366; Hari Chand Sarda v. Mizo
District Council and Anr. AIR 1967 SC 829; and Krishnan
Kakkanth v. Government of Kerala and Ors. (1997) 9 SCC
495 : AIR 1997 SC 129).
xxx x x
26. Keeping in view the analysis made of legal positions,
and in the absence of any material to discount legitimacy of
policy, the respondents have not made out a case for
interference.
27. In the aforesaid background the residual plea of the
respondents regarding legitimate expectation is also
sans merit.
28. The appeals deserve to be allowed; which we direct.
Costs made easy.‖ (emphasis supplied)
168
87. The second judgment of the Supreme Court, cited by
learned senior counsel for petitioner, is in Food
Corporation of India v. Kamdhenu Cattle Feed
Industries case (supra). What is all about in the said
case is regarding invitation of tenders by the State
government, reserving power to reject all tenders, as is
available in the case in hand with respondent CVPP, for
sale of stocks of damaged food grains. In the said case,
since the amount of the highest tenderer was found to be
inadequate, negotiations were made with all the tenderers
but offer of significantly higher amount than quoted in the
highest tender, accepted. Such acceptance by the
authority has been held by the Supreme Court not
arbitrary or discriminatory. In the said case, the
respondent's bid in the tender was admittedly the highest
as found on opening the tenders. It appears that the
appellant was not satisfied about the adequacy of the
amount offered in the highest tenders for purchase of the
stocks of damaged food grains and therefore, instead of
accepting any of the tenders submitted, the appellant
invited all tenderers to participate in the negotiation. The
respondent refused to revise the rates in its tender.
During negotiations, in which all tenderers, including the
respondent, were present, were given equal opportunity
169
and amongst them one of the tenderer gave highest bid
than respondent. Respondent filed writ petition before
Punjab and Haryana High Court. The writ petition was
allowed and appellant Food Corporation of India was
directed to allot to the respondent the necessary stocks of
damaged rice for which the tenders had been invited by
the appellant since the respondent was highest bidder.
Thereagainst, appellant Food Corporation of India
knocked at doors of the Supreme Court. In terms of the
cited judgment, the Supreme Court allowed the appeal
and set-aside the judgment of the Punjab and Haryana
High Court. The Supreme Court held that respondent's
highest tender was superseded only by a significantly
higher bid made during the negotiations with all tenderers,
giving them equal opportunity to compete by revising their
bids and the fact that it was a significantly higher bid
obtained by adopting this course is sufficient in the facts
of the case to demonstrate that the action of the appellant
satisfied the requirement of non-arbitrariness, and it was
taken for cogent reason of inadequacy of price offered in
the highest tender, which reason was evident to all the
tenderers invited to participate in the negotiations and to
revise their bids. Thus the High Court was in error in
taking the contrary view.
170
Now, if we see within the prism of cited case (Food
Corporation of India v. Kamdhenu Cattle Feed Industries),
and the course adopted therein, which has been held by
the Supreme Court sufficient to demonstrate that the
action of appellant (Food Corporation of India) satisfied
the requirement of non-arbitrariness and the same having
been taken for cogent reason, then in the case in hand,
such course should have been adopted by respondent
No.1, which has not been adopted by respondent CVPP.
Thus, it would be safe to say that had respondent No.1
adopted the course, as was adopted by appellant Food
Corporation of India in the cited case, the situation might
have been totally different and the better bid/offer might
have been given by any of the other tenderers in the
present case. Petitioner company herein should not forget
that respondent CVPP, instead of calling all tenderers to
negotiation, exclusively gave preference to and invited
petitioner company and tried its best to persuade
petitioner company to reach at a level, where respondent
CVPP and petitioner company could reach at concluded-
contract. However, negotiations between petitioner
company and respondent CVPP did not mature, which
resulted in cancellation of the turnkey execution tender
and starting of fresh tender on package mode basis. In
171
such circumstances, the course, adopted herein by
respondent CVPP, was sufficient to demonstrate that
action of respondent CVPP satisfied the requirement of
non-arbitrariness and the decision, impugned in this
petition, has been taken for cogent reason, which need
not be interfered with by this Court.
88. Madras City Wine Merchants' Association and
another v. State of T.N. and another59. The cited
judgement relates to challenge thrown to change of
policy. The Government of Tamil Nadu terminated
licences for carrying on business in retail vending of
Indian-made foreign spirits. The challenge to change of
policy terminating the licences was on the ground that
change of policy should pass muster of Article 14 of the
Constitution of India as once the State Government
permitted sale of liquor, change of policy was to be tested
on the touchstone of Article 14 of the Constitution as the
Supreme Court had taken the view in one of its earlier
judgements that due consideration of every legitimate
expectation in the decision-making process was a
requirement of the rule of non-arbitrariness and change of
policy should not be done arbitrarily. It may not be out of
place to mention here that again the instant cited
59
(1994) 5 SCC 509
172
judgment on the doctrine of legitimate expectation is not
coming forward to push any help to the case of petitioner
owing to the Supreme Court in the cited judgement, in net
result, dismissed the appeals and writ petition of Madras
City Wine Merchants' Association. Some of germane
extracts of cited judgement on doctrine of legitimate
expectation, with emphasis supplied, are reproduced:
―Question No.2: Whether the appellants can claim the
benefit of doctrine of legitimate expectation?
43. We will briefly deal with the doctrine of legitimate expectation.
It is not necessary to refer to large number of cases excepting the
following few: On this doctrine Clive Lewis in 'Judicial Remedies in
Public Law at page 97 states thus :
"Decisions affecting legitimate expectation. -- In the public
law field, individuals may not have strictly enforceable
rights but they may have legitimate expectations. Such
expectations may stem either from a promise or a
representation made by a public body, or from a proviso
practice of a public body, The promise of a hearing before
a decision is taken may give rise to a legitimate
expectation that a hearing will be given. A past practice of
consulting before a decision is taken may give rise to an
expectation of consultation before any future decision is
taken. A promise to confer, or past practice of conferring a
substantive benefit, may give rise to an expectation that
the individual will be given a hearing before a decision is
taken not to confer the benefit. The actual enjoyment of a
benefit may create a legitimate expectation that the benefit
will not be removed without the individual being given a
hearing. On occasions, individuals seek to enforce the
promise of expectation itself, by claiming that the
substantive benefit be conferred. Decisions affecting such
legitimate expectations are subject to judicial review."
44. In Council of Civil Service Unions v. Minister for the Civil
Service, [1984] 3 All ER 935 at pages 943-44 it is stated thus:
"But even where a person claiming some benefit or
privilege has no legal right to it, as a matter of private law,
he may have a legitimate expectation of receiving the
benefit or privilege, and, if so, the courts will protect his
expectation by judicial review as a matter of public law.
This subject has been fully explained by Lord Diplock in
O'Reilly v. Mackman, [1982] 3 All ER 1124 = (1983) 2 AC
237 and I need not repeat what he has so recently said.
Legitimate, or reasonable, expectation may arise either
from an express promise given on behalf of a public
authority or from the existence of a regular practice which
the claimant can reasonably expect to continue. Examples
of the former type of expectation are Re Liverpool Taxi
Owners' Association [1972] 2 All ER 589, (1972) 2 QB 299
and A-G of Hong Kong v. Ng Yuen Shiu, [1983] 2 All ER
173
346 = (1983) 2 AC 629. (I agree with Lord Diplock's view,
expressed in the speech in this appeal, that 'legitimate' is
to be preferred to 'reasonable' in this context, I was
responsible for using the word 'reasonable' for the reason
explained in Ng Yuen Shiu, but it was intended only to be
exegetical of 'legitimate.') An example of the latter in R v.
Hull Prison Board of Visitors, ex p. St. Germain, [1979] 1
All ER 701, [1979] QB 425, approved by this House in
O'Reilly v. Mackman, [1982| 3 All ER 1124 at 1126 =
[1983] 2 AC 237 at 274."
45. In Halsbury's Laws of England, Vol. 1(1) Fourth Edition Para
81 at pages 151-52 it is stated thus:
"81 Legitimate expectations. A person may have a
legitimate expectation of being treated in a certain way by
an administrative authority even though he has no legal
right in private law to receive such treatment.
O'Reilly v. Mackman, [1983] 2 AC 237 at 275, HL; A-G of
Hong Kong v. Ng Yuen Shiu, [1983], 2 AC 629, [1983] 2 All
ER 346, PC; Council of Civil Service Unions v. Minister for
the Civil Service, [1985] AC 374, [1984] 3 All ER 935, H.L.
The expectation must plainly be a reasonable one: A-G of
Hong Kong v, Ng Yuen Shiu supra. It seems that a
person's own conduct may deprive any expectations he
may have of the necessary quality of legitimacy.
Cinnamond v. British Airports Authority, [1980] 2 All ER
368, [1980] 1 WLR 582, CA.
The expectation may arise either from a representation or promise
made by the authority,
R v. Liverpool Corpn. ex p. Liverpool Taxi Fleet Operator's
Association, [1972] 2 QB 299, [1972] 2 All ER 589, CA; A-
G of Hong Kong v. Ng Yuen Shiu, [1983] 2 AC 629, [1983J
2 All ER 346, PC; Council of Civil Service Unions v.
Minister for the Civil Service, [1985] AC 374 = [1984] 3 All
ER 935, HL; R. v. Home Secretary, ex P. Oloniluyi, [1988]
Times, 26 November, CA; R. v. Brent London Borough
Council, ex P, Macdonagh, [1989) Times, 22 March.
Although there is an obvious analogy between the
doctrines of legitimate expectation and of estoppel, the two
are distinct, and detrimental reliance upon the
representation is not a necessary ingredient of a legitimate
expectation; see R. v. Secretary of State for the Home
Department, ex p Khan, [1985] All ER 40 at 48, 52, [1984]
1 WLR 1337 at 1347, 1352, CA; and see para 23 ante. In
relation to Inland Revenue extra - statutory concessions
and assurances, see R v. A-G, ex p ICI pic, [1986] 60 TC I;
R v. HM Inspector of Taxes, Hull, ex p Bnmfteld, [1988]
Times, 25 November; and R v. IRC, ex p MFK
Underwriting Agencies Ltd., [1989] Times, 17 July; of Re
Preston, [1985] AC 835, [1984] 2 All ER 327, HL.)
including an implied representation, [R v. Secretary of
State for the Home Department, ex p Khan, [1985] 1 All ER
40, [1984] 1 WLR 1337, CA (setting out criteria for exercise
of discretion in guidance letter given to prospective
adoptive parents of children requiring entry clearance led
to legitimate expectation that clearance would be granted
where those criteria were satisfied. See also R v, Powys
County Council, ex p Howner [1988] Times, 28 May; and R
v. Brent London Borough Council, ex p Macdonagh, [1989]
Times 22 March. In R v. Brent London Borough Council, ex
p gunning, [1986] 84 LGR 168 the court appears to have
relied in part on what were in effect express or implied
174
representations by the Secretary of State (contained in
departmental circulars) that there would be consultation,
although the duty to consult was being imposed upon the
local authority.]
or from consistent past practice.
O'Reilly v. Mackman, [1983], 2 AC 237 at 275, [1982] 2 All
ER 1124 at 1126-1127, HL; Council of Civil Service Unions
v. Minister for the Civil Service, [1985], AC 374, [1984] 3
All ER 935, HL; R v. Brent London Borough Council, ex p
Gunning, [1986] 84 LGR 168; R v. Secretary of State for
the Home Department, ex p Ruddock, [1987] 2 all ER
1025, [1987] 1 WLR 1482.
It is not clear to what extant a legitimate
expectation may arise other than by way of a
representation or of past practice; neither factor would
seem to have been present in R v. Secretary, of State for
Transport, exp Greater London Council, [1986] OB
556=[1985] 3 All ER 300. See also note 8 infra. However,
procedural duties imposed as a result of looking at all the
surrounding circumstances will normally be treated as
illustrations of the general duty to act fairly in all the
circumstances (see para 84 post) rather than of a
legitimate expectation; of R. v. Great Yarmouth Borough
Council, ex p Botton Bros Arcades Ltd, [1988] 56 p & CR
99 at 109; and see Westminister City Council (1986) AC
668 at 692-693, [1986] 2 All ER 278 at 288-289, HL, per
Lord Bridge of Harwich, dissenting on another point.
The existence of a legitimate expectation may have a
number of different consequences: it may give locus standi to
seek leave to apply for judicial review;
(O'Reilly v. Mackman, [1983] 2 AC 237, 275, [1982]
3 All ER 1124-1127; HL; Council of Civil Sendee Unions v.
Minister for the Civil Service, [1985] AC 374 at 408, [1984]
3 AU ER 935 at 949, HL, per Lord Diplock; Re Findlay
[1985] AC 318, [1984] 3 AU ER 801 at 830, HL.)
It may mean that the authority ought not to act so as to
defeat the expectation without some overriding reason of public
policy to justify its doing so;
R. v. Liverpool Corpn. ex p Liverpool Taxi Fleet
Operators' Association, [1972] 2 OB 299, [1972] 2 All ER
589, CA; R v. Secretary of State for the Home Department.
exp Ruddock, [1987] 2 All ER 1025, [1987] 1 WLR 1482,
and cf HTV Ltd v. Price Commission, [1976] ICR 170, CA.
But where the expectation arises out of an administrative
authority's existing policy, it can only be that the policy for
the time being in existence will be fairly applied, and
cannot be invoked to prevent a change of policy fairly
carried out: Re Findlay [1985] AC 318 at 338, [1984] 3 AU
ER 801 at 830, HL; R v. Secretary of State for the
Environment, ex p Barratt (Guildford) Ltd, [1988] Times 3
April; and see R v. Secretary of State for the Home
Department, ex p Ruddock supra.
or it may mean that, if the authority proposes to defeat a person's
legitimate expectation, it must affirm him an opportunity to make
representations on the matter.
A-G of Hong Kong v. Ng Yien Shiu, [1983] 2 AC
629 = [1983] 2 All ER 346, PC; Council of Civil Service
Unions v. Minister for the Civil Service, [1985] AC 374,
[1984] 3 All ER 935, HL; R v. Secretary of State for the
Home Department, ex p Khan, [1985] 1 All ER 40, [1984] 1
WLR 1337, CA. Sometimes the expectation will itself be of
175
consultation or the opportunity to be heard; R v. Liverpool
Corpn., ex p Liverpool Taxi, Fleet Operators' Association,
[1972] 2 QB 299, [1972] 2 All ER 589, CA; A-G of Hong
Kong v. Ng Yien Shiu supra; Council of Civil Service
Unions, v. Minister for the Civil Service supra; and see
Ltyod v. McMahon, [1987] AC 625 at 715 1 All ER 1118 at
1170-1171, HL,per Lord Templeman (legitimate
expectation is just a manifestation of the duty to act
fairly). But the scope of the doctrine goes beyond the
right to be heard; R v. Secretary of State for the Home
Department, ex p Ruddock, [1987] 2 All ER 1025, [1987] 1
WLR 1482. See also R. v. Bamet London Borough
Council, ex p Pardes House School Ltd, [1989] Inde-
pendent, 4 May; and R v. Powys County Council, exp
Homer, [1988] Times, 28 May. There is, however, a
legitimate expectation of reappointment to a public body: R
v. North East Thames Regional Health Authority, ex p de
Groot, [1988] Times, 16 April.
The courts also distinguish, for example in licensing cases,
between original applications, applications to renew and
revocations; a party who has been granted a licence may have a
legitimate expectation that it will be renewed unless there is some
good reason not to do so, and may therefore be entitled to greater
procedural protection than a mere applicant for a grant.
Mclnnes v. Onslow Fane, [1978] 3 All ER 211 at
218, (1978) 1 WLR 1520 at 1529; Schmidt v. Secretary of
State for Home Affairs, (1969) 2 Ch 149,' [1968] 3 All ER
795, CA (legitimate expectation of foreign alien that
residence permit will not be revoked before expiry but not
of renewal); Breen v. Amalgamated Engineering Union,
(1971] 2 OB 175, [1971] 1 All ER 1148, CA (legitimate
expectation that winner of trade union election would be
confirmed in his post by relevant committee); R v. Bamsley
Metropolitan Borough Council, ex p Hook, [1976] 3 All ER
452, [1976] 1 WLR 1052, CA. Where there has
previously been no general system of control, an
existing trader does not have a legitimate expectation
of being granted a licence when such a system is
introduced; R. v. Bristol City Council, ex p Pearce, [1985]
83 LGR 711.
46. Three cases of this Court may now be seen. In State of H.P.
v, Kailash Chand Mahajan, [1992] Supp. 2 SCC 351 at pages
386-87 in a judgment to which one of us was a party it was stated
thus:
"It might be urged by the tenure of appointment there is a
right to continue; the legitimate expectation has come to be
interfered with. In a matter of this kind, as to whether
legitimate expectation could be pleaded is a moot point.
However, we will now refer to Wade's Administrative Law
(6th Edn.) wherein it is stated at pages 520-21, as under:
"Legitimate expectation : positive effect. - The
classic situation in which the principles of natural
justice apply is where some legal right, liberty or
interest is affected, for instance where a building is
demolished or an office-holder is dismissed or a
trader's licence is revoked. But good administration
demands their observance in other situations also,
where the citizen may legitimately expect to be
treated fairly. As Lord Bridge has explained :
176
Westminister CC, Re, (1986) AC 668 at 692, Lord
Diplock made a formal statement in the Council of Civil
Service Unions case (below) at 408, saying that the
decision must affect some other person either -
(a) by altering rights or obligations of that person which
are enforceable by or against him in private law; or (b)
by depriving him of some benefit or advantage
which either (i) he had in the past been permitted by
the decision-maker to enjoy and which he can
legitimately expect to be permitted to continue to do until
there has been communicated to him more rational
grounds for withdrawing it on which he has been given
an opportunity to comment; or (ii) he has received
assurance from the decision-maker will not be withdrawn
without giving him first an opportunity of advancing
reasons for contending that they should not be
withdrawn.
This analysis is 'classical but certainly not exhaustive' : R
v. Secretary of State for the Environment ex. p.
Nottinghamshire CC, [1986] AC 240 at 249 (Lord
Scarman). One case which does not seem to be covered
is that of a first-time applicant for a licence (below,
p.559).
The Courts have developed a relatively novel doctrine in
public law that a duty of consultation may arise from a
legitimate expectation of consultation aroused either by a
promise or by an established practice of consultation.'
In a recent case, in dealing with legitimate expectation in R v.
Ministry of Agriculture, Fisheries and Food, ex pane Jaderow Ltd.,
[1991] 1 All ER 41, it has been observed at page 68:
"Question II: Legitimate expectation: It should be pointed
out in this regard that, under the powers reserved to the
member states by Article 5(2) of Regulation 170 of 1983,
fishing activities could be made subject to the grant of
licences which , by their nature, are subject to temporal
limits and to various conditions. Further-more, the
introduction of the quota system was only one event
amongst others in the evolution of the fishing industry,
which is characterised by instability and continuous
changes in the situation due to a series of events such as
the extensions, in 1976, of fishing areas to 200 miles from
certain coasts of the Community, the necessity to adopt
measures for the conservation of fishery resources, which
was dealt with at the international level by the intro-duction
of total allowable catches, the arguments about the
distribution amongst the member states of the total
allowable catches available to the Community, which were
finally distributed on the basis of a reference period which
ran from 1973 to 1978 but which is reconsidered every
year.
In those circumstances, operators in the fishing
industry were not justified in taking the view that the
Community rules precluded the making of any changes to
the conditions laid down by national legislation or practice
for the grant of licences to fish against national quotas as
the adoption of new conditions compatible with Community
law.
Consequently, the answer to this question must be that
com-munity law as it now does not preclude legislation or a
practice of a member state whereby a new condition not
previously stipulated is laid down for the grant of licences
to fish against national quotas."
177
Thus, it will be clear even legitimate expectation cannot
preclude legislation,''
47. In Food Corporation of India v. M/S. Kamdhenu Cattle
Feed Industries, JT (1992) 6, 259 at 264 this Court observed thus:
(SCC p. 76, para 8)
"The mere reasonable or legitimate expectation of a
citizen, in such a situation, may not by itself be a distinct
enforceable right, but failure to consider and give due
weight to it may render the decision arbitrary, and this is
how the requirement of due consideration of a legitimate
expectation forms part of the principle of non-arbitrariness,
a necessary concomitant of the rule of law. Every
legitimate expectation is a relevant factor requiring due
consideration in a fair decision making process. Whether
the expectation of the claimant is reasonable or legitimate
in the context is a question of fact in each case. Whenever
the question arises, it is to be determined not according to
the claimant's perception but in larger public interest
wherein other more important considerations may
outweight what would otherwise have been the legitimate
expectation of the claimant. A bona fide decision of the
public authority reached in this matter would satisfy the
requirement of non-arbitrariness and withstand judicial
scrutiny. The doctrine of legitimate expectation gets
assimilated in the rule of law and operates in our legal
system in this manner and to this extent"
48. In Union of India v. Hindustan Development Corporation, JT
(1993) 3 S.C. 15 at pages 50-51 this Court observed thus ;
"It has to be noticed that the concept of legitimate
expectation in administrative law has now, undoubtedly,
gained sufficient importance. It is stated that "Legitimate
expectation" is the latest recruit to a long list of concepts
fashioned by the courts for the review of administrative
action and this creation takes its place beside such
principles as the rules of natural justice,
unreasonableness, the fiduciary duty of local authorities
and "in future", perhaps, the principle of proportionality." A
passage in Administrative Law, Sixty Edition by H.W.R.
Wade page 424 reads thus :
"These are revealing decisions. They show that the courts
now expect government departments to honour their
published statements or else to treat the citizen with the
fullest personal consideration. Unfairness in the form of
unreasonableness here comes close to unfairness in the
form of violation of natural justice, and the doctrine of
legitimate expectation can operate in both contexts. It is
obvious, furthermore, that this principle of substantive, as
opposed to procedural, fairness may undermine some of
the established rules about estoppel and misleading
advice, which tend to operate unfairly. Lord Scarman has
stated emphatically that unfairness in the purported
exercise of a power can amount to an abuse or excess of
power, and this seems likely to develop into an important
general doctrine."
Another passage at page 522 in the above book reads thus:
"It was in fact for the purpose of restricting the right to be
heard that 'legitimate expectation' was introduced into the
law. It made its first appearance in a case where alien
students of 'scientology' were refused extension of their
entry permits as an act of policy by the Home Secretary,
who had announced that no discretionary benefits would
178
be granted to this sect. The Court of Appeal held that they
had no legitimate expectation of extension beyond the
permitted time, and so no right to a hearing, though
revocation of their permits within that time would have
been contrary to legitimate expectation. Official statements
of policy, therefore, may cancel legitimate expectation, just
as they may create it, as seen above. In a different context
where car-hire drivers had habitually offended against
airport byelaws, with many convictions and unpaid fines, it
was held that they had no legitimate expectation of being
heard before being banned by the airport authority.
There is some ambiguity in the dicta about legitimate
expectation, which may mean either expectation of a fair
hearing or expectation of the licence or other benefit which
is being sought. But the result is the same in either case;
absence of legitimate expectation will absolve the public
authority from affording a hearing. (emphasis supplied)"
Again, at pages 56-57 it is observed thus :
"...........A case of legitimate expectation would arise when
a body by representation or by past practice aroused
expectation which it would be within its powers to fulfill.
The protection is limited to that extent and a judicial review
can be within those limits. But as discussed above a
person who bases his claim on the doctrine of legitimate
expectations, in the first instance, must satisfy that there is
a foundation and thus has locus standi to make such a
claim. In considering the same several factors which give
rise to such legitimate expectation must be present. The
decision taken by the authority must be found to be
arbitrary, unreasonable and not taken in public interest. If it
is a question of policy, even by way of change of old
policy, the courts cannot interfere with a decision. In a
given case whether there are such facts and cir-
cumstances giving rise to a legitimate expectation, it would
primarily be a question of fact. If these tests are satisfied
and if the court is satisfied that a case of legitimate
expectation is made but then the next question would be
whether failure to give an opportunity of hearing before the
decision affecting such legitimate expectation is taken, has
resulted in failure of justice and whether on that ground the
decision should be quashed. If that be so then what should
be the relief is again a matter which depends on several
factors. " (Emphasis supplied)
Again at pages 57-58 it is observed thus :
"Legitimate expectations may come in various forms and
owe their existence to different land of circumstances and
it is not possible to give an exhaustive list in the context of
vast and fast expansion of the governmental activities.
They shift and change so fast that the start of our list would
be absolute before we reached the middle. By and large
they arise in cases of promotions which are in normal
course expected, though no guaranteed by way of a
statutory right, in cases of contracts, distribution of largess
by the Government and in somewhat similar situations. For
instance in cases of discretionary grant of licences, permits
of the like, carries with it a reasonable expectation, though
not a legal right to renewal or non- revocation, but to
summarily disappoint that expectation may be seen as
unfair without the expectant person being heard, But there
again the court has to see whether it was done as a policy
or in the public interest either by way of G.O., rule or by
179
way of a legislation. If that be so, a decision denying a
legitimate expectation based on such grounds docs not
qualify for interference unless in a given case, the decision
or action taken amounts to an abuse of power. Therefore
the limitation is extremely confined and if the according of
natural justice does not condition the exercise of the
power, the concept of legitimate expectation can have no
role to play and the court must not usurp the discretion of
the public authority which is empowered to take the
decisions under law and the court is expected to apply an
objective standard which leaves to the deciding authority
the full range of choice watch the legislature is presumed
to have intended. Even in a case where the decision is left
entirely to the discretion of the deciding authority without
any such legal bounds and if the decision is taken fairly
and objectively, the court will not interfere on the ground of
procedural fairness to a person whose interest based on
legitimate expectation might be affected. For instance if an
authority who has full discretion to grant a licence and if he
prefers an existing licence holder to a new applicant, the
decision cannot be interfered with on the ground of
legitimate expectation entertained by the new applicant
applying the principles of natural justice, It can therefore be
seen that legitimate expectation can at the most be one of
the grounds which may give rise to judicial review but the
granting of relief is very much limited. It would thus appear
that there are stronger reasons as to why the legitimate
expectation should not be substantively protected than the
reasons as to why it should be protected. In other words
such a legal obligation exists whenever the case
supporting the same in terms of legal principles of different
sorts, is stronger than the case against it. As observed in
Attorney General for New South Wales' case "To strike
down the exercise of administrative power solely on the
ground of avoiding the disappointment of the legitimate
expectations of an individual would be to set the courts
adrift on a featureless sea of pragmatism. Moreover, the
notion of a legitimate expectation (falling short of a legal
right) is too nebulous to form a basis for invalidating the
exercise of a power when its exercise otherwise accords
with law." If a denial of legitimate expectation in a given
case amounts to denial of right guaranteed or is arbitrary,
discriminatory, unfair or biased, gross abuse of power of
violation of principles of natural justice, the same can be
questioned on the well-known grounds attracting Article 14
but a claim based on mere legitimate expectation without
anything more cannot ipso facto give a right to invoke
these principles." (Emphasis supplied)
From the above it is clear that legitimate expectation may
arise -
(a) if there is an express promise given by a public
authority; or
(b) because of the existence of a regular practice which the
claimant can reasonably expect to continue ;
(c) Such an expectation must be reasonable.
However, if there is a change in policy or in public interest
the position is altered by a rule or legislation, no question
of legitimate expectation would arise.‖
180
After having quoted the above observations and law
laid down by the Supreme Court, what emerges in
relation to instant case, is that there was no express
promise given by respondent CVPP to make formal
allotment order in favour of petition company for turnkey
execution. There was non-existence of a regular practice
in respondent CVPP, which petitioner company could
have practically expected to continue. However, since
respondent CVPP has changed the turnkey execution to
package mode, therefore, no question of legitimate
expectation would arise.
89. Some of the observations in cited judgment of the
Supreme Court in Union of India and others v.
Hindustan Development Corporation and others, case
(supra) have already been discussed and quoted in
above referred to judgement passed in Madras City Wine
Merchants' Association & anr. v. State of T.N. and anr.
However, it would be apt to have a glimpse of the cited
judgment. This case relates to fixation of price. On the
doctrine of legitimate expectation, while discussing
meaning, nature and scope of the doctrine and also basis
or foundation of rights and obligations vis-à-vis the
administrative authorities arising out therefrom, the
Supreme Court has held that it only operates in public law
181
field and ―denial does not by itself confer an absolute right
to claim relief, and that the court will not interfere merely
on ground of change in government policy". In
government contract private parties for supply of goods,
in absence of any fixed procedure for fixation of price and
allotment of quantity to be supplied, the Supreme court
has also held that ―adoption of dual pricing policy by
government (lower price for big suppliers and higher price
for small suppliers) in public interest and allotment of
quantity by suitability adjusting the same so as to break
the cartel [lobby/alliance/ league], does not involve denial
of any legitimate expectation".
On the question of Courts' interference in the action
taken by Government, it was observed that one basic
principle which must guide the Court in arriving at its
determination on this question is that there is always a
presumption that the Governmental action is reasonable
and in public interest and it is for the party challenging its
validity to show that it is wanting in reasonableness or is
not informed with public interest. This burden is a heavy
one and it has to be discharged to the satisfaction of the
Court by proper and adequate material. The Court cannot
lightly assume that the action taken by the Government is
unreasonable or without public interest because as we
182
said above, there are a large number of policy
considerations which must necessarily weigh with the
Government in taking action and therefore the Court
would not strike down government action as invalid
The Supreme Court considered the circumstances
under which the Government is not always bound to
accept the highest bid offered in a public auction and held
that : "It appears to us that the High Court had clearly
misdirected itself. The Conditions of Auction made it
perfectly clear that the Government was under no
obligation to accept the highest bid and that no rights
accrued to the bidder merely because his bid happened
to be the highest. Under condition 10 it was expressly
provided that the acceptance of bid at the time of auction
was entirely provisional and was subject to ratification by
the competent authority, namely, the State Government.
Therefore, the Government had the right, for good and
sufficient reason, we may say, not to accept the highest
bid but even to prefer a tenderer- other than the highest
bidder. The High Court was clearly in error in holding that
the Government could not refuse to accept the highest bid
except on the ground of inadequacy of the bid. Condition
10 does not so restrict the power of the Government not
to accept the bid. There is no reason why the, power
183
vested in the Government to refuse to accept the highest
bid should be confined to inadequacy of bid only. There
may be a variety of good and sufficient reasons, apart
from inadequacy of bids, which may impel the
Government not to accept the highest bid. In fact, to give
an antithetic illustration, the very enormity of a bid may
make it suspect. It may lead the Government to realise
that no bona fide bidder could possibly offer such a bid if
he meant to do honest business. Again the Government
may change or refuse its policy from time to time and we
see no reason why change of policy by the Government,
subsequent to the auction but before its confirmation, may
not be a sufficient justification for the refusal to accept the
highest bid. It cannot be dispute that the Government has
the right to change its policy from time to time, according
to the demands of the time and situation and in the public
interest‖.
Again the Supreme Court resolutely makes it clear
that if the Government is the exclusive owner of the
privileges, reliance on Article 19(1)(g) or Article 14 of the
Constitution of India, becomes irrelevant and that citizens
cannot have any fundamental right to trade or carry on
business in the properties or rights belonging to the
Government, nor can there be any infringement of Article
184
14, if the Government tries to get the best available price
for its valuable rights. The Supreme Court observed : "It is
for the Government to decide whether the price offered in
an auction sale is adequate. While accepting or rejecting
a bid, it is merely performed and executive function. The
correctness of its conclusion is not open 'to judicial
review. We fail to see how the plea of contravention of
Art. 19 (1) (g) or Art. 14 can arise in these cases. The
Government's power to sell the exclusive privileges set
out in s. 22 was not denied. It was also not disputed that
those privileges could be sold by public auction. Public
auctions are held to get the best possible price. Once
these aspects are recognised, there appears to be no
basis for contending that the owner of the privileges in
question who had offered to sell then cannot decline to
accept the highest bid if he thinks that the price offered is
inadequate. There is no concluded contract till the bid is
accepted. Before there was a concluded contract, it was
open to the bidders to withdraw their bids --see Union of
India and ors. v. M/s Bhimsen Walaiti Rani [1970] 2 SCR
594. By merely giving bids, the bidders had not acquired
any vested rights. The fact that the Government was the
seller does not change the legal position once its
exclusive right to deal with those privileges is conceded. If
185
the Government is the exclusive owner of those
privileges, reliance on Art. 19 (1) (g) or Art. 14 becomes
irrelevant. Citizens cannot have any fundamental right to
trade or carry on business in the properties or rights
belonging to the Government, nor can there be any
infringement of Article 14, if the Government tries to get
the best available price for its valuable rights".
It may not be out of place to mention here that we
must not forget that in complex economic matters every
decision is necessarily empiric and it is based on
experimentation or what one may call 'trial and error
method' and, therefore, its validity cannot be tested on
any rigid ‗a priori' considerations or on the application of
any strait-jacket formula. The court must while adjudging
the constitutional validity of an executive decision relating
to economic matters grant a certain measure of freedom
to play in the joints to the executive and that the Court
cannot strike down a policy decision taken by the State
Government merely because it feels that another policy
decision would have been fairer or wiser or more scientific
or logical.
186
In the cited judgment, the Supreme Court referred
to and quoted following observations of the decision
ofIndia Cement Ltd v. Union of India60:
"It was pointed out that what is best for the industry
and in what manner the policy should be formulated and
implemented. hearing in mind the object of supply and
equitable distribution of the commodity at a fair price in the
best interest of the general public, is a matter for decision
exclusively within the province of the Central Government
and such matters do not ordinarily attract the power of
judicial review. It was also held (hit even if some persons
are at a disadvantage and have suffered losses on account
of the formulation and implementation of the government
policy. that is not by itself' sufficient ground for interference
with the governmental action. Rejection of the principle of
fixation of price unit wise on actual cost basis of' each unit
was reiterated and it was pointed out that such a policy
promotes efficiency and provides and incentive to cut down
the cost introducing an element of healthy competition
among the units.‖
In the cited judgment, the Supreme Court also
made reference and quoted observations of the decision
rendered by its Constitution Bench in R. K. Garg v.
Union of India (1981)61, that rule of equal importance is
that laws relating to economic activities should be viewed
with greater latitude than laws touching the civil rights
such as freedom of speech religion etc. It has been said
by no less a person than Holmes, J. that the legislature
should be allowed some play in the joints, because it has
to deal with complex problems which do not admit of
solution through any doctrinaire or strait-.jacket formula
and this is particularly true in case of legislation dealing
60
(1990) 4 SCC 356
61
4 SCC 675 : 1982 SCC (Tax) 30
187
with economic matters, where having regard to the nature
of the problems required to be dealt with. Greater play in
the joints has to be allowed to the legislature. The Court
should feel more inclined to give judicial deference to
legislative judgment in the field of economic regulation
then in other areas where fundamental human rights are
involved. Nowhere has this admonition been more
felicitously expressed than in Morey v. Doud 354 US 457
where Frankfurter, J said in his inimitable style:
In the utilities, tax and economic regulation cases, there
are good reasons for judicial self-restraint if not judicial
deference to legislative judgment. The legislature after all
has the affirmative responsibility. The courts have only the
power to destroy, not to reconstruct. When these are
added to the complexity of economic regulation, the
uncertainty, the liability to error, the bewildering conflict of
the experts, and the number of times the judges have been
overruled by events --self-limitation can be seen to be the
path of judicial wisdom and institutional prestige and
stability." (emphasis supplied)
In Peerless General Finance and Investment Co.
Limited and Another v. Reserve Bank of India
etc.62,the accent of power of the Courts interfering in such
economic policy matters was considered and it was held
as under:
"The function of the Court is to see that lawful authority is
not abused but not to appropriate to itself the task
entrusted to that authority. It is well settled that a public
body invested with statutory powers must take care not
exceed or abuse its power. It must keep within the limits of
the authority committed to it. It must act in good faith and it
must act reasonably. Courts are not to interfere with
economic policy which is the function of experts. It is
not the function of the courts to sit in judgment over
62
(1992) 2 SCC 343
188
matters of economic policy and it must necessarily be
left to the expert bodies. In such matters even expert can
seriously and doubtlessly differ. Courts cannot be
expected to decide them without even the aid of
experts." (emphasis supplied)
Pertinent to mention here that expectation cannot
be the same as anticipation. It is not like a wish, a desire
or a hope nor can it amount to a claim or demand on the
ground of right. However, earnest and sincere a wish, a
desire or a hope may be and however confidently one
may look to them to be fulfilled, they by themselves
cannot amount to assertable expectation and a mere
disappointment does not attract legal consequences. A
pious hope even leading to a moral obligation cannot
amount to a legitimate expectation. The legitimacy of an
expectation can be inferred only if it is found on the
sanction of law or custom or an established procedure
followed in regular and natural sequence. Again it is
distinguishable from a genuine expectation. Such
expectation should be justifiably legitimate and
protectable. Every such legitimate expectation does not
by itself fructify into a right and therefore it does not
amount to a right in the conventional sense. These are
the observations and expressions made by the Supreme
Court in the cited judgement.
189
In the cited judgment, the Supreme Court has made
an important observations on the doctrine of legitimate
expectation, which are reproduced hereunder with
emphasis supplied:
―33. On examination of some of these important
decisions it is generally agreed that legitimate expectation
gives the applicant sufficient locus standi for judicial review
and that the doctrine of legitimate expectation is to be
confined mostly to right of a fair hearing before a decision
which results in negativing a promise or withdrawing an
undertaking is taken. The doctrine does not give scope to
claim relief straightaway from the administrative authorities
as no crystallised right as such is involved. The protection of
such legitimate expectation does not require the fulfillment of
the expectation where an overriding public interest requires
otherwise. In other words where a person's legitimate
expectation is not fulfilled by taking a particular then
decision-maker should justify the denial of such expectation
by showing some overriding public interest. Therefore even
if substantive protection of such expectation is
contemplated that does not grant an absolute right to a
particular person. It simply ensures the circumstances in
which that expectation may be denied or restricted. A case
of legitimate expectation would arise when a body by
representation or by past practice aroused expectation which
it would be within its powers to fulfil. The protection is limited
to that extent and a judicial review can be within those limits.
But as discussed above a person who bases his claim on
the doctrine of legitimate expectation, in the first instance,
must satisfy that there is a foundation and thus has locus
standi to make such a claim. In considering the same
several factors which give rise to such legitimate expectation
must be present. The decision taken by the authority must
be found to be arbitrary, unreasonable and not taken in
public interest. If it is a question of policy, even by way of
change of old policy, the courts cannot interfere with a
decision. In a given case whether there are such facts and
circumstances giving rise to a legitimate expectation, it
would primarily be a question of fact. If these tests are
satisfied and if the court is satisfied that a case of legitimate
expectation is made out then the next question Would be
whether failure to give an opportunity of hearing before the
decision affect such legitimate expectation is taken has
resulted in failure of' justice and whether on that ground the
decision should he quashed. If that be so then what should
be the relief is again a matter which depends on several
factors.
34. We find in Attorney General for New South Wales'
case that the entire case law on the doctrine of legitimate
expectation has been considered. We also find that on an
elaborate an erudite discussion it is held that the courts'
190
jurisdiction to interfere is very much limited and much
less in granting any relief in a claim based purely on the
ground of 'legitimate expectation'. In Public Law and
Politics edited by Carol Harlow, we find an article by
Gabriele Ganz in which the learned author after examining
the views expressed in the cases decided by eminent judges
to whom we have referred to above, concluded thus:
"The confusion and uncertainty at the heart of the
concept stems from its origin. It has grown from two
separate roots, natural justice or fairness and
estoppel., but the stems have become entwined to
such an extent that it is impossible to disentangle
them. This makes it that it is very difficult to predict
how the hybrid will develop in future.This could be
regarded as giving the concept a healthy flexibility, for
the intention behind it is being it has been fashioned
to protect the individual against administrative action
which is against his interest. On the other hand, the
uncertainty of the concept has led to conflicting
decisions and conflicting interpretations in the same
decision."
However, it is generally accepted and also clear that
legitimate expectation beings less than right operate in the
field of public and not private law and that to some extent
such legitimate expectation ought to be protected though not
guaranteed.
35. Legitimate expectations may come in various
forms and owe their existence to different kind of
circumstances and it is not possible to give an exhaustive list
in the context of vast and fast expansion of the governmental
activities. They shift and change so fast that the start of our
list would be obsolete before we reached the middle. By and
large they arise in cases of promotions which are in normal
course expected, though not guaranteed by way of a
statutory right, in cases of contracts, distribution of largest by
the Government and in somewhat similar situations. For
instance in cases of discretionary grant of licences, permits
or the like, carries with it a reasonable expectation, though
not a legal right to renewal or non-revocation, but to
summarily disappoint that expectation may be seen as unfair
without the expectant person being heard. But there again
the court has to see whether it was done as a policy or in the
public interest either by way of G.O., rule or by way of a
legislation. If that be so. a decision denying a legitimate
expectation based on such (,rounds does not qualify for
interference unless in a given case, the decision or action
taken amounts to an abuse of power. Therefore the limitation
is extremely confined and if the according of natural justice
does not condition the exercise of the power, the concept of
legitimate expectation can have no role to play and the
court must not usurp the discretion of the public
authority which is empowered to take the decisions
under law and the court is expected to apply and
objective standard which leaves to the deciding
authority the full range of choice which the legislature is
presumed to have intended. Even in a case where the
191
decision is left entirely to the discretion of the deciding
authority without any such legal bounds and if the decision is
taken fairly and objectively, the court will not interfere on the
ground of procedural fairness to a person whose interest
based on legitimate expectation might be affected. For
instance if an authority who has full discretion to grant a
licence and if he prefers an existing licence holder to a new
applicant, the decision cannot be interfered with on the
ground of legitimate expectation entertained by the new
applicant applying the principles of natural justice. It can
therefore be seen that legitimate expectation can at the most
be one of the grounds which may give rise to judicial review
but the granting of relief is very much limited. It would thus
appear that there are stronger reasons as to why the
legitimate expectation should not be substantively protected
than the reasons as to why it should be protected. In other
words such a legal obligation exists whenever the case
supporting the same in terms of legal principles of different
sorts, is stronger than the case against it. As observed in
Attorney General for New South Wales' case "To strike down
the exercise of administrative power solely on the ground of
avoiding the disappointment of the legitimate expectations of
an individual would be to set the courts adrift on a
featureless sea of pragmatism. Moreover, the notion of a
legitimate expectation (falling short of a legal right) is too
nebulous to form a basis for invalidating the exercise of
power when its exercise otherwise accords with law." If a
denial of legitimate expectation in a given case amounts to
denial of right guaranteed or is arbitrary, discriminatory unfair
or based, gross abuse of power or violation of principles of
natural justice, the same can be questioned on the well-
known grounds attracting Article 14but a claim based on
mere legitimate expectation without anything more
cannot ipso facto give a right to invoke these principles.
It can be one of the ground to consider but the court must lift
the veil and see whether the decision is violative of these
principles warranting interference. It depends very much on
the facts and the recognised general principles of
administrative law applicable to such facts and the concept
of legitimate expectation which is the latest recruit to a long
list of concepts fashioned by the courts for the review of
administrative action, must be restricted to the general legal
limitations applicable and binding the manner of the future
exercise of administrative power in a particular case. It
follows that the concept of legitimate expectation is "not the
key which unlocks the treasury of natural justice and it ought
not to unlock the gates which shuts the court out of review
on the merits," particularly when the element of speculation
and uncertainty is inherent in that very concept. As
cautioned in Attorney General for New South Wales' case
the courts should restrain themselves and restrict such
claims duty to the legal limitations. It is a well-meant caution.
Otherwise a resourceful litigant having vested interests
in contracts. licences etc. can successfully indulge in
getting welfare activities mandated by directive
principles thwarted to further his own interests. The
192
caution, particularly in the changing scenario, becomes all
the more important.‖ (emphasis supplied)
90. The judgement of the Supreme Court, cited by learned
senior counsel for petitioner, passed in case titled
Jitendra Kumar and others v. State of Haryana and
another, has already been discussed herein above. The
said judgement relates to service-matter and bears no
resemblance with the case in hand. In the said case,
appeals arose out of common judgment and order passed
by a Division Bench of the Punjab and Haryana High
Court, whereby and whereunder writ petitions filed by
appellants (Jintendra Kumar and others) praying, inter
alia, for issuance of a writ in the nature of mandamus
directing respondents to issue letters of appointments to
them on the premise that they had been selected in
Haryana Civil Services (HCS) (Executive Branch) and/or
Allied Services pursuant to or in furtherance of the result
declared by Haryana Public Service Commission as also
for quashing Notification whereby cadre strength of HCS
(Executive Branch) was reduced from 300 to 230, were
dismissed. The Supreme Court held that no case was
made out for interference with impugned judgment of the
High Court and dismissed the appeals accordingly.
Though the attention of the Supreme Court in the cited
case was invited to legitimate expectation but the
193
Supreme Court made it clear that ―We also fail to see any
reason as to why the doctrine of promissory estopped will
apply in the instant case‖.
91. The judgement of the Supreme Court inPunjab
Communications Ltd. v. Union of India & Ors., referred
to by learned senior for petitioner, has already been
discussed herein above on the doctrine of legitimate
expectation. Nevertheless, given the facts and
circumstances of the cited case as having some
resemblance with the case in hand, it is relevant to make
mention of certain facts of the said case herein, for
facilitation of arriving at just conclusion in the present
case. In the said case, appellant [Punjab Communications
Ltd.(PCL)] filed two appeals against judgment of High
Court of Punjab and Haryana as also against order in
review application, before the Supreme Court. The main
facts of the case are that in September 1993, Asian
Development Bank (ADB) agreed to grant a soft loan to
the Union of India (1st respondent) for funding a project
meant to provide digital wireless telecom facility to 36,000
identified villages in Eastern U.P. The Department of
Telecommunications (DOT) floated a tender inviting offers
open to Indian and foreign companies. There were 14
offers including one from the appellant. The Technical
194
Evaluation Committee (TEC) examined the offers. After
scrutiny, TEC shortlisted appellant (PCL) and BEL. It is
appellant's case that on account of some pressure
brought on respondents no.5 (Member (P) Telecom
Commission) DOT and Respondent no.6 (Advisor (T)
Telecom Commission) DOT, the matter was referred by
respondent no.5 to High Level Committee (HLC), with a
view to obtain an opinion to disqualify appellant so that
the Department could go in for an outmoded `analog'
system (rather than the `digital' system) to be provided by
some multinational company, which was wanting to dump
its outmoded `analog' system in the India. It is the
appellant's case that this was done with a view to enable
the issue of a fresh notification calling for fresh tenders
pertaining to `analog' system. HLC submitted its report
that there were two `deviations' in appellant's tenders
submitted as noticed by TEC in respect of the required
specifications. The Committee required department to
negotiate orally with the appellant. Negotiation was held.
A note was prepared by respondent no.6, convenor of
High Level Committee, stating that further Technical
Evaluation of the project was likely to go further due to
complexities of bids offered by manufacturers and also in
view of the want of authentication of the "proveness" of
195
the system proposed by appellant. It then stated that a
decision had been taken not to go ahead with the ADB
loan as it would result in heavy commitment charges and
Department must go ahead for implementation of rural
telecom project through its own resources. According to
the appellant, these minutes were back-dated inasmuch
as Chairman TC's office diary recorded a note that
Chairman (TC) wanted para 2 to be modified to say that
the Department did not have any technically responsive
bid and that none of the offered systems were proven and
therefore Department might not go ahead with the loan
and the draft might be modified in consultation with
ADV(T)/DDG(LPT) & resubmitted. According to the
appellant, the convenor of the High Level Committee
created these imaginary deficiencies in the appellant's bid
and prepared backdated minutes and showed that all the
High Level Committee members had signed the minutes.
These backdated minutes, it is alleged, were prepared as
a ground for rejection of the tender, in spite of the fact that
5 years were spent on drafting the specifications and in
the evaluation of bids. Appellant made a representation
to respondent no.2, but order was passed, cancelling the
tenders. Appellant then filed writ petition in Punjab &
Haryana High Court, which was dismissed. A review
196
application was filed but that was also dismissed.
Thereafter, appellant moved the Supreme Court. The
Supreme Court, after discussing all facets of the matter,
including doctrine of legitimate expectation, opined that
nothing was irrational or perverse in the decision taken by
respondents inasmuch as irrationality or perversity was
not attracted and the revised policy cannot be said to be
in such gross violation of any substantive legitimate
expectation of the appellant and accordingly dismissed
the appeals. Therefore, the cited case as well has not
rendered any support to the case of petitioner.
92. On the ground/point of ―arbitrary‖ he has referred: (i)
Sanchit Bansal and another v. Joint Admission Board
and others63; State of Orissa and another v. Mamata
Mohanty64; State of Tamil Nadu and others v. K.
Shyam Sunder and others65; Kumari Shrilekha
Vidyarthi and others v. State of U.P. and others66; and
East Coast Railway and another v. Mahadev Appa
Rao and others67.
93. Insofar as citation Sanchit Bansal and another v. Joint
Admission Board and others, is concerned, the said
63
(2012) 1 SCC 157
64
(2013) 3 SCC 436
65
(2011) 8 SCC 737
66
(1991) 1 SCC 212
67
(2010) 7 SCC 678
197
case relates to education, selection, admission and
procedure to various courses. In the said case, the
Supreme Court, while referring to its earlier decisions,
observed that the Court should be extremely reluctant to
substitute its own views as to what is wise, prudent and
proper in relation to academic matters in preference to
those formulated by professional men, possessing
technical expertise and rich experience of actual day-to-
day working of educational institutions and department
controlling them and that the courts are neither equipped
nor have academic or technical background to substitute
themselves in place of statutory professional technical
bodies and take decisions in academic matters involving
standards and quality of technical education. If the courts
start entertaining petitions from individual institution or
students to permit courses of their choice, either for their
convenience or to alleviate hardship or to provide better
opportunities, or because they think that one course is
equal to another, without realising the repercussions on
the field of technical education in general, it will lead to
chaos in education and deterioration in standards of
education. The Supreme Court further observed that
Courts do not act as appellate authorities to examine the
correctness, suitability and appropriateness of a policy,
198
nor are courts advisors to the executive on matters of
policy which the executive is entitled to formulate and that
courts cannot interfere with policy either on the ground
that it is erroneous or on the ground that a better, fairer or
wiser alternative is available. The Supreme Court, while
summing up, observed that the procedure adopted in JEE
2006 may not be the best of procedures, nor as sound
and effective as the procedures. But there is no ground
for the courts to interfere with the procedure, even if it
was not accurate or efficient in the absence of mala fide
or arbitrariness or violation of law and it is not possible to
impute mala fides or arbitrariness, or grant any relief to
the first appellant, therefore, dismissed the appeal.
94. Qua State of Orissa and another v. Mamata Mohanty,
it relates totally to different field. In the said case
respondent was appointed as Lecturer in Niali College,
Niali. Government of Orissa, in order to provide better
facilities to teachers and enhance standard of higher
education, came out with a Notification with revised pay
scale as per recommendations of University Grants
Commission (UGC). Respondent approached High Court
for pre-revised pay scale retrospectively. High Court
passed in her favour placing reliance on various orders
passed earlier in cases of other persons. Dissatisfied
199
therewith and other orders passed by the High Court,
State of Orissa filed various appeals before the Supreme
Court, which were clubbed and disposed of by the cited
common judgement. It is pertinent to mention here that
the Supreme Court in the cited judgement after
considering rival submission made by the parties, as of
the view that as the questions raised had never been
considered by any of the courts and involve questions of
law of public importance, as such, took up various
issues/questions, like Statutory provisions, procedure of
selection of candidates, condition of eligibility of
candidates, relevant part of notification/circulars/ letters,
education, appointment/employment with advertisement,
order bad in inception, eligibility lacking, relaxation,
delay/laches, relief not claimed--cannot be granted,
Article 14, per incuriam--doctrine, including arbitrariness.
On the ground of arbitrariness, the Supreme Court
observed that every action of the State or its
instrumentalities should neither be suggestive of
discrimination nor even an impression of bias, favouritism
and nepotism. Insofar as case in hand is concerned,
respondent CVPP has not entered into negotiation with
any other company or as far as that is concerned has not
granted, given or allotted contract in favour of any other
200
company, instead of petitioner company. But respondent
CVPP has cancelled the whole process of ‗turnkey tender'
and started fresh tender on ‗package mode', so that the
owner/respondent incurs cost for only those events which
actually occurs. As already made clear hereinabove, that
right to refuse the lowest or any other tender, is always
available to the Government. There can be no
infringement of Article 14, if the Government tries to get
best person or best quotation. The right to choose cannot
be considered to be an arbitrary power, is trite law on the
subject. In the case in hand, petitioner company and
respondent CVPP entered into negotiations, which,
however, could not conclude to the expectation of
petitioner company. The decision to cancel ‗turnkey
tender' by impugned decision, and start fresh tender
process for ‗package mode', by impugned tender notices,
cannot be said to be arbitrary, unreasonable and mala
fide. Be that as it may, the action of respondent CVPP
contained in impugned decision, is not arbitrary.
95. Insofar as State of Tamil Nadu and others v. K. Shyam
Sunder and others is concerned, it has completely no
sameness with the case in hand. It relates to school
education system, curriculum, youth of the nation and
development of personality of a child at the time of basic
201
education during his formative years of life. The Supreme
Court in the cited case has held that the younger
generation has to compete in global market and
education is not a consumer service nor can the
educational institution be equated with shops, therefore,
there are statutory prohibitions for establishing and
administering educational institutions without prior
permission or approval by the authority concerned. In that
view of the matter, the case in hand does not at all relate
to the subject-matter of cited judgment. Whatever,
observations made in the cited judgement with respect to
any various doctrines, including arbitrariness, have direct
link, bearing and nexus with education system and
matters incidental therewith and not with commercial
activities or contract matters, as is in the present case.
96. Kumari Shrilekha Vidyarthi and others v. State of U.P.
and others relates to terminating appointment of all
Government Counsel (Civil, Criminal, Revenue) in all
districts of the State of Uttar Pradesh. Whatever
discussed therein in toto relate and pertain to service
matters and not to contract-matters. Whatever laid down
in the cited judgement or those discussed herein above,
which have been cited by the learned senior counsel for
petitioner, cannot be treated as a statute to apply to the
202
every case that are commercial in nature as is the present
case. It is well settled law that Courts should not place
reliance on decisions without discussing as to how the
factual situation fits in with the fact situation of the
decision on which reliance is placed. Observations of
courts are neither to be read as Euclid's theorems nor as
provisions of a statute and that too taken out of their
context. These observations must be read in the context
in which they appear to have been stated. Judgments of
courts are not to be construed as statutes.
97. It may not be out of place to point out here that it is well
settled law that a judgment of a Court is not to be read
mechanically as a Euclid's theorem nor as if it was a
Statute. On the subject of precedents Lord Halsbury, L.C.
said in Quinn vs. Leathem68:
―Now before discussing the case of Allen Vs. Flood
(1898) AC 1 and what was decided therein, there are
two observations of a general character which I wish to
make, and one is to repeat what I have very often said
before, that every judgment must be read as applicable
to the particular facts proved or assumed to be proved,
since the generality of the expressions which may be
found there are not intended to be expositions of the
whole law, but are governed and qualified by the
particular facts of the case in which such expressions
are to be found. The other is that a case is only an
authority for what it actually decides. I entirely deny that
it can be quoted for a proposition that may seem to
follow logically from it. Such a mode of reasoning
assumes that the law is necessarily a logical Code,
whereas every lawyer must acknowledge that the law is
not always logical at all.‖
68
1901 AC 495
203
The Supreme Court inAmbica Quarry Works v.
State of Gujarat and ors69 has observed that the ―ratio of
any decision must be understood in the background of the
facts of that case. It has been said a long time ago that a
case is only an authority for what it actually decides and
not what logically follows from it‖.
In Bhavnagar University v. Palittana Sugar Mills
Pvt. Ltd.70, the Supreme Court observed that ―It is well
settled that a little difference in facts or additional facts
may make a lot of difference in the precedential value of a
decision‖. As held in Bharat Petroleum Corporation Ltd.
& another v. N.R. Vairamani & another71, a decision
cannot be relied on, without disclosing the factual
situation. The Supreme Court also observed:
―Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the
fact situation of the decision on which reliance is placed.
Observations of Courts are neither to be read as Euclid's
theorems nor as provisions of the statute and that too
taken out of the context. These observations must be
read in the context in which they appear to have been
stated. Judgments of Courts are not to be construed as
statutes. To interpret words, phrases and provisions of a
statute, it may become necessary for judges to embark
into lengthy discussions but the discussion is meant to
explain and not to define. Judges interpret statutes, they
do not interpret judgments. They interpret words of
statutes; their words are not to be interpreted as statutes‖
69
(1987) 1 SCC 213
70
(2003) 2 SCC 111
71
AIR 2004 SC 4778
204
Lord Mac Dermotin London Graving Dock Co.
Ltd. v. Horton72, observed that ―The matter cannot, of
course, be settled merely by treating the ipsissima verba
of Willes, J. as though they were part of an Act of
Parliament and applying the rules of interpretation
appropriate thereto. This is not to detract from the great
weight to be given to the language actually used by that
most distinguished judge‖.
In Home Office v. Dorset Yacht Co.73Lord Reid
said, ―Lord Atkin's speech ... is not to be treated as if it
was a statute definition; it will require qualification in new
circumstances, Megarry, J. in (1971) 1 WLR 1062
observed: "One must not, of course, construe even a
reserved judgment of Russell L.J. as if it were an Act of
Parliament‖. And in Herrington vs. British Railways
Board74, Lord Morris said:
―There is always peril in treating the words of a speech or
judgment as though they are words in a legislative
enactment, and it is to be remembered that judicial
utterances are made in the setting of the facts of a
particular case.
Circumstantial flexibility, one additional or different fact
may make a world of difference between conclusions in
two cases. Disposal of cases by blindly placing reliance
on a decision is not proper. The following words of Lord
Denning in the matter of applying precedents have
become locus classicus : Each case depends on its own
facts and a close similarity between one case and
72
(1951 AC 737 at page 761)
73
(1970 (2) All ER 294)
74
(1972 (2) WLR 537)
205
another is not enough because even a single significant
detail may alter the entire aspect. In deciding such cases,
one should avoid the temptation to decide cases (as said
by Cardozo, J.) by matching the colour of another. To
decide, therefore, on which side of the line a case falls,
the broad resemblance to another case is not at all
decisive.
Precedent should be followed only so far as it marks the
path of justice, but you must cut the dead wood and trim
off the side branches else you will find yourself lost in
thickets and branches. My plea is to keep the path of
justice clear of obstructions which could impede it.‖
The same view has been taken by the Supreme
Court in Sarva Shramik Sanghatana (K.V.), Mumbai v.
State of Maharashtra & Ors.75, and Government of
Karnataka &ors. v. Gowramma & ors76.
Thus, in view of the above decisions, it cannot be
said that the decision relied upon or for that matter other
citations referred to by learned senior counsel for
petitioner, is/are an authority on the extreme proposition
canvassed.
98. Insofar as East Coast Railway and another v. Mahadev
Appa Rao and others, case (supra), cited by learned
senior counsel for petitioner, is concerned, it relates and
pertain to the process of examination, selection and
recruitment for filling up vacant posts of Chief Typists in
East Coast Railway and has no resemblance as it totally
75
AIR 2008 SC 946
76
AIR 2008 SC 863
206
fall within realm of Service Jurisprudence and not the Law
of Contract.
99. On the issue/ground of ‗reasonableness', learned senior
counsel has referred the judgements passed in Union of
India v. Shiv Shanker Kesari77, which relates to Nacotic
Drugs and Psychotropic Substances and grant of bail,
and Municipal Corporation of Delhi v. M/s Jagan Nath
Ashok Kumar and another78, which relates to
arbitration. The second citation relates to post-contract-
stage dispute and not pre-contract stage, which was
referred to arbitration and the Arbitrator's Award was
assailed before the High Court and thereafter before the
Supreme Court. The Supreme Court held that the award
of the arbitrator was assailed on trivial grounds and the
challenge was rightly rejected by the High Court and
dismissed the appeal.
100. On the ground of power of the ―Court to review decision of
respondent CVPP on facts‖, learned senior counsel for
petitioner submits that this Court, while dealing with the
question of arbitrariness and unreasonability, has power
to review and examine the facts, so as to arrive at
requisite conclusion and that this Court may see the
77
(2007) 7 SCC 798
78
(1987) 4 SCC 497
207
opinion of the Experts, decision of the Board of Directors
and reports of the Committees which had recommended
to allot contract and no committee had recommended
rejection of the tender, which will demonstrate that the
Board of Directors illegally evaluated the reports of the
Committee, which reports had earlier been accepted by
the Board. On the same set of facts the Board of
Directors, with different composition of members, has
arrived at two different conclusions. Learned counsel has
submitted that instant case is a fit case, where the facts
need to be evaluated by this Court as having been ruled
by the Apex Court in Tata Cellular v. Union of India
case (supra) and New Horizons Limited and another v.
Union of India and others79. Insofar as Tata Cellular
case (supra) is concerned, the said citation has been
discussed in detail in Maa Binda Express Carrier case
(supra) by the Supreme Court, which squarely covers the
instant case. The Supreme Court in Maa Binda Carrier
case (supra) has held that the bidders, participating in the
tender process, cannot insist that their tenders should be
accepted simply because a given tender is highest or
lowest depending upon whether the contract is for sale of
public property or for execution of works on behalf of the
79
(1995) 1 SCC 478
208
Government. Now remains the second cited case, i.e.
New Horizons LIimted and another v. Union of India and
others; it relates to joint venture company, as in the said
case the appellant (New Horizons Limited) was not
allowed to partake in tender process as according to
respondents appellant was not possessing some of
eligibilities of tender, whereas appellant was possessing
required experience/eligibility for partaking and competing
in tender process. The said judgement also makes
interesting scholarly transcripts as about four different
attitudes towards the company in judicial pronouncements
as also with respect to a company being an agency or
instrumentality of the State in terms of Article 12 of the
Constitution of India, which aspect has also been dealt
with herein above. Therefore, the said case is totally
different from the facts and circumstances of the instant
case.
101. Learned senior counsel for petitioner has, on the
ground/point of ―whether respondent CVPP has absolute
power to reject tender in terms of Article 1.2 of ITB‖, cited
judgements passed in Union of India and others v.
Dinesh Engineering Corporation and another80, which
relates to purchase of spare parts under a proprietary
80
(2001) 8 SCC 491
209
basis from EDC without calling for tenders whereas in the
instant case, tender notice was floated; and Kopex-shaft
Sinking Company and ors v. Hindustan Copper
Limited and anr.81, which is totally on different subject-
matter. He has, on the ground/point of ―cost of re-
bidding‖, ―price treated as sole criteria‖, and ―commercial
consideration‖ also cited Asia Foundation &
Construction Ltd v. Trafalgar House Construction (I)
Ltd and others82. On the ground/point of ―what is meant
by public interest‖ learned senior counsel has cited
decision of the Supreme Court in Raunaq International
Ltd. v. I.V.R. Contraction Ltd. and others83. The said
judgement, it is relevant to mention here, deals with
various facets of the matter which relate to the instant
case as well, including Courts to adopt restrain in granting
interim orders, where public interest is involved. It would
be appropriate to reproduce relevant portion(s) of the
judgement, with emphasis supplied:
―9. The award of a contract, whether it is by a private
party or by a public body or the State, is essentially a
commercial transaction. In arriving at a commercial
decision considerations which are of paramount
importance are commercial considerations. These would
be:
(1) The price at which the other side is willing to do
the work;
(2) Whether the goods or services offered are of the
requisite specifications;
81
2013 AIR (Calcutta) 34
82
(1997) 1 SCC 738
83
(1999) 1 SCC 492
210
(3) Whether the person tendering has the ability to
deliver the goods or services as per specifications.
When large works contracts involving engagement of
substantial manpower or requiring specific skills are to
be offered, the financial ability of the tenderer to fulfil
the requirements of the job is also important;
(4) the ability of the tenderer to deliver goods or
services or to do the work of the requisite standard
and quality;
(5) past experience of the tenderer, and whether he
has successfully completed similar work earlier; (6)
time which will be taken to deliver the goods or
services; and often
(7) the ability of the tenderer to take follow up action,
rectify defects or to give post contract services.
Even when the State or a public body enters into a
commercial transaction, considerations which would prevail
in its decision to award the contract to a given party would
be the same. However, because the State or a public body
or an agency of the State enters into such a contract, there
could be, in a given case, an element of public law or public
interest involved even in such a commercial transaction.
10. What are these elements of public interest? (1) Public
money would be expended for the purposes of the contract;
(2) The goods or services which are being commissioned
could be for a public purpose, such as, construction of roads,
public buildings, power plants or other public utilities. (3) The
public would be directly interested in the timely fulfilment of
the contract so that the services become available to the
public expeditiously. (4) The public would also be
interested in the quality of the work undertaken or
goods supplied by the tenderer. Poor quality of work or
goods can lead to tremendous public hardship and
substantial financial outlay either in correcting mistakes
or in rectifying defects or even at times in re-doing the
entire work - thus involving larger outlays or public
money and delaying the availability of services, facilities
or goods. e.g. A delay in commissioning a power project, as
in the present case, could lead to power shortages,
retardation of industrial development, hardship to the general
public and substantial cost escalation.
xxxx
13. Hence before entertaining a writ petition and passing any
interim orders in such petitions, the court must carefully
weigh conflicting public interests. Only when it comes to a
conclusion that there is an overwhelming public interest in
entertaining the petition, the court should intervene.
xxxxx
18. The same considerations must weigh with the court
when interim orders are passed in such petitions. The party
at whose instance interim orders are obtained has to be
made accountable for the consequences of the interim order.
The interim order could delay the project, jettison finely
worked financial arrangements and escalate costs.
Hence the petitioner asking for interim orders, in
211
appropriate cases should be asked to provide security
for any increase in cost as a result of such delay, or any
damages suffered by the opposite party in consequence
of an interim order. Otherwise public detriment may
outweigh public benefit in granting such interim orders. Stay
order or injunction order, if issued, must be moulded to
provide for restitution;
xxxxxx
21. It is unfortunate that despite repeated observations
of this court in a number of cases, such petitions are
being readily entertained by the High Courts without
weighing the consequences. In the case of Fertiliser
Corporation Kamgar Union (Regd.), Sindri and Ors. v. Union
of India and Ors,[1981] 1 SCC 568, this court observed that
if the Government acts fairly, though falters in wisdom, the
court should not interfere. The Court observed:
"A pragmatic approach to social justice compels us to
interpret constitutional provisions, including those like
Articles 32 and 226, with a view to see that effective
policing of the corridors of power is carried out by the
court until other ombudsman arrangement..............
emerges............ The court cannot usurp or abdicate,
and the parameters of judicial review must be clearly
defined and never exceeded. If the Directorate of a
Government company has acted fairly, even if it has
faltered in its wisdom, the court cannot, as a super
auditor, take the Board of Directors to task. This
function is limited to testing whether the administrative
action has been fair and free from the taint of
unreasonableness and has substantially complied
with norms of procedure set for it by rules of public
administration.''
22. In Tata Cellular v. Union of India, [1994] 6 SCC 651, this
Court again examined the scope of judicial review in the
case of a tender awarded by a public authority for carrying
out certain work. This Court acknowledged that the
principles of judicial review can apply to the exercise of
contractual powers by Government bodies in order to
prevent arbitrariness or favouritism. However, there are
inherent limitations in the exercise of that power of
judicial review. The Court also observed that the right to
choose cannot be considered as an arbitrary power.
......
After examining a number of authorities, the Court concluded (at page 687) as follows ;-
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. 212 (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative or quasi- administrative sphere. However, the decision can be tested by the application of the "Wednesbury principle" of reasonableness and the decision should be free from arbitrariness, not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased arid unbudgeted expenditure. Dealing with interim orders, this Court observed in Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd. and Ors.,[1985] 2 SCR 190 at page 196 that an interim order should not be granted without considering balance of convenience, the public interest involved and the financial impact of an interim order. Similarly, in Ramniklal N. Bhutto and Anr: v. State of Maharashtra and Ors., [1997] 1 SCC 134, the Court said that while granting a stay the court should arrive at a proper balancing of competing interests and grant a stay only when there is an overwhelming public interest in granting it, as against the public detriment which may be caused by granting a stay. Therefore, in granting an injunction or stay order against the award of a contract by the Government or a Government agency, the court has to satisfy itself that the public interest in holding up the project far out-weighs the public interest in carrying it out within a reasonable time. The court must also take into account the cost involved in staying the project and whether the public would stand to benefit by incurring such cost.
Therefore, when such a stay order is obtained at the instance of a private party or even at the instance of a body litigating in public interest, any interim order which stops the project from proceeding further, must provide for the reimbursement of costs to the public in case ultimately the litigation started by such an individual or body fails. The public must be compensated both for the delay in implementation of the project and the cost escalation resulting from such delay. Unless an adequate provision is made for this in the interim order, the interim order may prove counter-productive. In the present case it was submitted that the terms and conditions of the tender specified the requisite qualifying criteria before a person could offer a tender. The criteria which were so laid down could not have been relaxed because such a relaxation results in a denial of opportunity to others. In our view the High Court has seriously erred in granting the interim order. The appeals are, therefore, allowed and the impugned order is set aside. M/s IVR 213 Construction Ltd. shall pay to the appellants herein the costs of the appeals.‖ (emphasis supplied)
102. Learned senior counsel has also placed reliance on the decision in Maa Binda Express Carrier case(supra), which has already been discussed herein above. He has as well cited Onkar Lal Bajaj and others v. Union of India and another84, which relates to cancellation of allotments, made with respect to retail outlets, KPS distributorships and SKO-LDO dealerships and therefore, distinguishable from the facts of the instant case and insofar as case titled, Oil and Natural Gas Corporation Limited v. Western Geco International Limited85, is concerned, the same is totally on different subject-matter viz. post contract dispute, which was referred to arbitration and the award of arbitrator was under
challenge, thus, having no likeness with the facts of the instant case.
103. In Jagdish Mandal v. State of Orissa and ors86, the Supreme Court has held that a contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in 84 (2003) 2 SCC 673 85 (2014) 9 SCC 263 86 (2007) 14 SCC 517 214 public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.
104. Tenders, in the present scenario, are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinised by technical experts and sometimes third party assistance from those not connected with owner's organisation is taken. This ensures objectivity. It is because to check and ascertain that technical ability and financial feasibility are confidently optimistic and cheerful and are workable and realistic. There is multifaceted complex approach, highly technical in nature. The tenders where public largesse is put to auction, stand on a different area. The subject-matter of case in hand requires technical expertise. Parameters applied in it are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. In view of that, technical evaluation or comparison by this Court would be impermissible. The principle which is applied to 215 scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner (respondent CVPP), therefore, should be allowed to carry out the purpose and there has to be allowance of free play in the joints. My view is fortified by the observations and conclusions drawn by the Supreme Court in Montecarlo Ltd v. NTPC Ltd87. It observed:
―24. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinised by technical experts and sometimes third party assistance from those unconnected with the owner's organization is taken. This ensures objectivity. Bidder's expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic. There is multi-prong complex approach; highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied in it are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule...... Technical evaluation or comparison by the Court would be impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints.‖ 87 AIR 2016 SC 4946 216
105. In Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium)88, it was held by the Supreme Court, relying on a host of decisions, that the decision making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer, should not be interfered with. Interference is permissible only if the decision making process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one, which no responsible authority acting reasonably and in accordance with law could, have reached. In other words, the decision making process or the decision should be perverse and not merely faulty or incorrect or erroneous. The constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute its view for that of the administrative authority.
106. The Supreme Court in Afcons Infrastructure Ltd. v.
Nagpur Metro Rail Corporation Ltd89 has pointed out that mere disagreement with the decision making process of the decision of the authority is no reason for a constitutional Court to interfere. The owner of a project as 88 AIR 2016 SC 3814 89 AIR 2016 SC 4305 217 author of tender, is best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents and that it is possible that the owner may give interpretation to tender documents, which is unacceptable to constitutional Courts, but that per se is not a reason for interfering with the interpretation given. The Supreme Court held:
―13. In other words, a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.
....
15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given.‖
107. The Supreme Court has also in Gujarat Maritime Board v. L&T Infrastructure Development Projects Ltd. and another90, pointed out that normally the courts would not exercise such a discretion where there are very serious disputed questions of fact, which are of complex nature and require oral evidence for their determination. Even in 90 AIR 2016 SC 4502 218 cases where question is of choice or consideration of competing claims before entering into the field of contract, the facts have to be investigated and found before the question of violation of Article 14 of the Constitution, could arise. If those facts are disputed and require assessment of evidence, the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution.
108. The Supreme Court has by judgement dated 18th October 2016, in Civil Appeal Nos. 10182-10183 of 2016 (SLP(C) Nos. 28959-28960 of 2015)Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO) and another v. CSEPDI - Trishe Consortium and another with Civil Appeal Nos. 10184-10185 of 2016 (SLP Nos. 30098-30099 of 2015)91, held that in fiscal evaluation the Court has to apply the doctrine of restraint and several aspects, clauses, contingencies, etcetera have to be factored and that these calculations are best left to experts and those, who have knowledge and skills in the field. The Court further has observed that the financial computation involved, the capacity and efficiency of the 91 AIR 2016 SC 4879 219 bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants; the courts cannot enter into the said realm in exercise of power of judicial review; and that the courts cannot sit in appeal over financial consultant's assessment and that it is neither ex facie erroneous nor can we perceive as flawed for being perverse or absurd. The concluding paragraphs are very important to be noticed, which are reproduced hereunder, with emphasis supplied:
―36. From the aforesaid, it is vivid that the Consultant has analysed the offers regard being had to the tender conditions. Be it ingeminated that the analysis and determination made by the financial consultant has been carried out before receipt of any additional document from either side. The documents were called for by the owner from both the qualifying bidders in a transparent manner and the same have been considered at the time of evaluation by the Consultant. Submission of Mr. Sibal is that the evaluation is ex facie defective inasmuch as the Consultant has loaded certain charges as a consequence of which the price has gone up. Mr. Rohatgi, learned Attorney General appearing for BHEL and Mr. Prasad, learned senior counsel appearing for the Corporation would submit that the evaluation is founded on definities leaving nothing to any kind of contingency. They have referred to the Term Sheet and what is put up by Industrial and Commercial Bank of China Limited. At this juncture we are obliged to say that in a complex fiscal evaluation the Court has to apply the doctrine of restraint. Several aspects, clauses, contingencies, etc. have to be factored. These calculations are best left to experts and those who have knowledge and skills in the field. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. The courts cannot really enter into the said realm in exercise of power of judicial review.We cannot sit in appeal over the financial consultant's assessment. Suffice it to say, it is neither ex facie erroneous nor can we perceive as flawed for being perverse or absurd.220
37. Before parting with the case we are constrained to add something. We do so with immense pain. The respondent, before finalization of the financial bid submitted series of representations and seeing the silence of the owner it knocked at the doors of the writ court which directed for consideration of the representations. We are disposed to think that the High Court at that stage should have exercised caution. If the courts would exercise power of judicial review in such a manner it is most likely to cause confusion and also bring jeopardy in public interest. An aggrieved party can approach the Court at the appropriate stage, not when the bids are being considered.
We do not intend to specify. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently.................... We have stressed this aspect only to highlight the role of the Court keeping in mind the established principle of restraint.
38. In view of our preceding analysis we are of the considered opinion that the Division Bench through the delineation has adopted the approach of an appellate forum or authority and extended the principle of judicial review to certain areas to which it could not have and, therefore, the judgment and order of the Division Bench followed the path of error in continuum. Consequently, the inevitable conclusion is unsettlement of the impugned order and we so direct. In the ultimate eventual the appeals stand allowed. There shall be no order as to costs.‖
109. From the above comprehensive discussion, what is deducible is that: (i) submission of tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept; (ii) the bidder(s), participating in tender process, cannot insist that his/their tender(s) should be accepted simply because a given tender is highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behalf of the Government, (iii) there can be no question of infringement of Article 14, if Government tries to get the 221 best person or best quotation; the right to choose cannot be considered to be an arbitrary power, (iv) the court does not sit as a court of appeal; (v) the court does not have expertise to correct the administrative decision; if a review of administrative decision is permitted, it will be substituting its own decision, without necessary expertise which itself may be fallible, (v) the terms of invitation to tender cannot be open to judicial scrutiny because invitation of tender is in the realm of contract; the decision to accept tender or award contract is reached by process of negotiations through several tiers; more often than not, such decisions are made qualitatively by experts, (vi) Government must have freedom of contract, (vii) quashing decision may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure.
In that view of the matter, Issue No.2 is decided in negative. As a corollary the decision taken by respondent CVPP to cancel the bid of petitioner company and ―Turnkey Tender‖ as also to invite fresh bids on ―package mode‖ in terms of the fresh tenders, need not be interfered with by this Court.
110. Further to point out here that if the rights are purely on private character, no mandamus can be issued, it has 222 been significantly made clear by the Supreme Court in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Samark Trust & ors v. R. Rudani & ors92. Thus, even if the respondent is a ‗State', other condition, which has to be satisfied for issuance of a writ of mandamus is the public duty. In a matter of private character or purely contractual field, no such public duty element is involved and, thus, mandamus will not lie. There is line of decisions on the subject-matter where the contract entered between the State and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order, it is a trite law, can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract.
111. It is not appropriate for the Court to interfere in a decision taken by the Government or the authorities concerned, after due consideration of all perspectives and full application of mind. The Supreme Court in N. D. Jayal vs. Union of India93, has observed:
―This Court cannot sit in judgement over the cutting edge of scientific analysis relating to the safety of any project. Experts in science may themselves differ in their opinions while taking decision on matters related to safety and allied aspects. The opposing viewpoints 92 (1989) 2 SCC 691 93 (2004) 9 SCC 362 223 of the experts will also have to be given due consideration after full application of mind. When the Government or the authorities concerned after due consideration of all viewpoints and full application of mind took a decision, then it is not appropriate for the court to interfere.‖
112. In Joshi Technologies International versus Union of India94, the Supreme Court, after discussing various decisions relating to contract and contractual obligations, dismissed the appeal of the contractor appellant, and held that writ jurisdiction of the High Court under Article 226 of the Constitution, would not exercise such a discretion if there are very serious disputed questions of fact, which are of complex nature and require oral evidence for their determination. It would be expedient to reproduce relevant portion of the judgement hereunder:
―The position thus summarized in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, can refuse to exercise. It also follows that under the following circumstances, 'normally', the Court would not exercise such a discretion:
(a) the Court may not examine the issue unless the action has some public law character attached to it.
(b) Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said made of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
(c) If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
94 (2015) 7 SCC 728 224
(d) Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. Further legal position which emerges from various judgments of this Court dealing with different situations/ aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under:
(i) At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
(ii) State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations.
(iii) Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-
examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit etc.
(iv) Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred.
(v) Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business.
(vi) Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
(vii) Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
(viii) If the contract between private party and the State/instrumentality and/or agency of State is under 225 the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction.
(ix) The distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract. This Court has maintained the position that writ petition is not maintainable. Dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
(x) Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.
(xi) The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.
Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded. As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. The appellant is presumed to have knowledge of the legal provision, namely, in the absence of such a clause, special allowances under Section 42 would impermissible. Still it signed the contract without such a 226 clause, with open eyes. No doubt, the appellant claimed these deductions in its income tax returns and it was even allowed these deductions by the Income Tax Authorities. Further, no doubt, on this premise, it shared the profits with the Government as well. However, this conduct of the appellant or even the respondents, was outside the scope of the contract and that by itself may not give any right to the appellant to claim a relief in the nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder.
Having considered the matter in the aforesaid prospective, we come to the irresistible conclusion that the appellant is not entitled to the relief claimed. Though it may be somewhat harsh on the appellant when it availed the benefit of Section 42 for few years and acted on the understanding that such a benefit would be given to it, but we have no option but to hold that PSCs did not provide for this benefit to be given to the appellant and the contract can be amended only if both the parties agree to do so, and not otherwise. Therefore, we are constrained to dismiss the appeal for the reasons given above.‖ From the above, the Supreme Court has laid down that if the contract between private party and the State/ instrumentality and/or agency of State is under the realm of a private law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law, rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction and that it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226, Constitution of India, as the matter is in the realm of pure contract. Same is true about the case in hand.
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113. In the present case the Pakal Dul HE Project is located on Marusudar River in District Kishtwar in Jammu and Kashmir. It involves transfer of Marusuadar River water to Chenab River upstream of Dul Dam of Dul Hasti HE Project. Palak Dul Project is a storage scheme and the gross storage of the reservoir is 125.4 Mcum. A maximum gross head of 417 m between the dam site at Drangdhun and power house site at Dul shall be utilized for power generation. For completion of the said project, International Competitive Bidding (ICB) was adopted for tendering for Turnkey Execution of Pak Dul HE Project. This comprised of two stage system of bidding, Stage-I (Technical and Qualification Particulars) Bids followed by Stage-II (Price) Bids. In response to Tender Notice dated 19th June 2013, five Consortia submitted their bids. The Stage-II Bids (Price Bid) were also submitted by all five Consortia on due date. Tender Evaluation Committee (TEC) was constituted by respondent CVPP to evaluate Stage-I Bid (Technical and Qualification Particulars) as well as Stage-II Bid (Price Bid) submitted by bidders. Four Bidders were considered techno-commercially responsive after detailed evaluation of Stage-I bid by TEC. The Stage-II (Price Bid) Bids of the four Bidders, who met the Qualification Criteria and whose Techno-commercial were 228 found responsive by TEC with approval of competent authority, were opened by the Tender Opening Committee (TOC) on 3rd February 2014. Petitioner company was assessed as lowest evaluated bidder by TEC. It was proposed to invite petitioner company for negotiation. The record reveals five meetings between June, 2014 to September, 2014 took place but of no yield. It appears that respondent CVPP, considering all aspects involved in Turnkey works, decided to cancel the ―turnkey tender‖ and ―invite fresh bids on package mode, so that CVPP incurs cost for only those events which actually occurs‖. This was followed by impugned cancellation letter dated 16th June 2016. Two Notices Inviting Tenders have also been issued by respondent CVPP. One is dated 2nd March 2016, for Domestic Competitive Bidding for the work and package of ―Construction of Diversion Tunnel (alongwith HM works) of Pakal Dul Hydroelectric Project". Second Notice Inviting Tender is for International Competitive Bidding for the work and package of ―Design and Construction of 2 nos. circular shaped Head Race Tunnels of length 7700 m each to be exacavated by two new independent TBMs and Associated works for Pakal Dul HE Project‖. Forthrightly saying, this Court cannot ask or foist respondent CVPP to stick to earlier Turnkey 229 execution of Pakal Dul (Drangdhuran) Hydroelectric Project. Respondent CVPP has expert's body available to take into account all facets as regards adoption of ―turnkey execution‖ or ―package mode‖ system. This Court cannot ask respondent CVPP that ―turnkey execution‖ is in the best interest of CVPP. The reason being that it is in the field and domain of respondent CVPP and this Court cannot step into the shoes of CVPP to decide what would be and would not be better for CVPP. It is exclusive domain of CVPP and not that of this Court.
114. It may not be out of place to mention here that this Court cannot sit as a court of appeal as this Court does not have the expertise to correct the decision of respondent CVPP inasmuch as reviewing the decision of respondent CVPP would be substituting its own decision, without the necessary expertise which itself may be fallible. This Court cannot scuttle or strangulate the freedom of contract of respondent CVPP.
115. Applying the foregoing parameters to the case at bar, this Court finds that the decision, impugned in the instant writ petition is immune from judicial review. Reliance is also placed on the decisions rendered by the Apex Court in 230 M/s Michigan Rubber (India) Ltd. v. State of Karnataka and Ors.95,State of Jharkhand and Ors. v. Cwe-Soma Consortium96, as also Tamil Nadu Generation and Distribution Corporation Ltd. case (supra). The Supreme Court in State of Jharkhand (supra) observed and held that "When the authority took a decision to cancel the tender due to lack of adequate competition and in order to make it more competitive, it decided to invite fresh tenders, it cannot be said that there is any mala fide or want of bona fide in such decision. While exercising judicial review in the matter of government contracts, the primary concern of the court is to see whether there is any infirmity in the decision-making process or whether it is vitiated by malafide, unreasonableness or arbitrariness.‖ It was held that ―The right to refuse the lowest or any other tender is always available to the government.... While so, the decision of tender committee ought not to have been interfered with by the High Court. In our considered view, the High Court erred in sitting in appeal over the decision of the Appellate to cancel the tender and float a fresh tender. Equally, the High Court was not right in going into the financial implication of a fresh tender."
95 AIR 2012 SC 2915 96 AIR 2016 SC 3366 231
116. In view of the aforesaid analysis, specially in absence of mala fide, prejudice, unreasonableness, arbitrariness, extraneous consideration or the decision being against public interest, the decision of respondent CVPP, cancelling ―turnkey tender‖ as also petitioner's bid and issuing fresh tender notices for ―package mode‖, need not be interfered with by this Court, is immune from judicial review in the given facts and circumstances. As a corollary, writ petition is devoid of any merit.
117. For all what has been discussed above, writ petition is dismissed. Interim direction(s) is/are vacated. However, it may not be out of place to mention here that it is expected that respondent CVPP will allow petitioner company, proforma respondents, or for that matter any other individual/company, to participate and compete in fresh bids on package mode, so that more competitors/bidders participate in the fresh bids, which will ultimately have a better results.
118. Having regard to the peculiar facts of the case, the parties are left to bear their individual costs.
119. Registry is directed to return the records to the learned counsel for the respondents.
(Tashi Rabstan) Judge Jammu 28/01/2017 'Madan'