Ms. Abc Trans Carriers Pvt. Ltd. vs Paradip Port Trust And Others on 27 July, 2015

[Cites 11, Cited by 1]

Orissa High Court

Ms. Abc Trans Carriers Pvt. Ltd. vs Paradip Port Trust And Others on 27 July, 2015

Equivalent citations: AIR 2015 (NOC) 1285 (ORI.)

Bench: D.H.Waghela

IN THE HIGH COURT OF ORISSA : CUTTACK

W.P.(C) Nos. 10308, 10331 & 10961 of 2015

In the matter of applications under Articles 226 & 227 of the
Constitution of India.

W.P.(C) No. 10308/2015

M/s. ABC Trans Carriers Pvt. Ltd. .. Petitioner

-Versus-
Paradip Port Trust & Ors. .. Opp.Parties.

W.P.(C) No. 10331/2015

M/s. Viable Infrastructure & Logistic
Pvt. Ltd. .. Petitioner

-Versus-
Paradip Port Trust & Ors. .. Opp.Parties.

W.P.(C) No. 10961/2015

M/s. Orissa Stevedores Pvt. Ltd. .. Petitioner

-Versus-
Paradip Port Trust & Ors. .. Opp.Parties.

In W.P.(C) No.10308 of 2015
For Petitioner : Dr. Ashok Kumar Mohapatra,
Senior Advocate,
M/s. Digambara Mishra

For Opp.Parties : M/s. Goutam Mishra, D.K. Patra &
A. Dash
[For O.P.Nos.1 to 7]

Mr. B. Gupta, Senior Advocate,
M/s. Keshab Chandra Kar,
G.M. Rath & S.S. Padhy
[For O.P. No.8]

M/s. Bijay Laxmi Tripathy, CGC
[For O.P. No.9]
-2-

In W.P.(C) No.10331 of 2015
For Petitioner : Mr. Ashok Mohanty, Senior Advocate,
M/s. Digambara Mishra

For Opp.Parties : M/s. Goutam Mishra, D.K. Patra &
A. Dash
[For O.P.Nos.1 to 7]

Mr. B. Gupta, Senior Advocate
M/s. Keshab Chandra Kar,
G.M. Rath, S.S. Padhy & S.K. Panda
[For O.P. No.8]

M/s. Bibekananda Nayak,
[For O.P. No.9]

In W.P.(C) No.10961 of 2015
For Petitioner : Mr. Sanjit Mohanty,Senior Advocate,
M/s. Digambara Mishra &
S.K. Satapathy

For Opp.Parties : M/s. Goutam Mishra, D.K. Patra &
A. Dash
[For Caveator (O.P. Nos. 1 to 7)]

Mr. B. Gupta, Senior Advocate
M/s. Keshab Chandra Kar,
G.M. Rath, S.S. Padhy &
C. Satapathy
[For O.P. No.8]

PRESENT:

THE HONOURABLE CHIEF JUSTICE MR. D.H.WAGHELA
AND
THE HON'BLE MR JUSTICE BISWANATH RATH
----------------------------------------------------------------------------------------
Date of Hearing : 14.07.2015 Date of Judgment : 27.07.2015
---------------------------------------------------------------------------------------

D.H.WAGHELA, C.J.

1. These three petitions by successful bidders for license to

supply, install, commission, operate and maintain three Harbour

Mobile Cranes ('HMC' in short) are argued and heard together and

disposed by this common judgment.
-3-

2. The petitioners M/s. ABC Trans Carriers Pvt. Ltd ('ABC' in

short), M/s. Orissa Stevedores Ltd ('OSL' in short) and M/s. Viable

Infrastructures & Logistic Pvt. Ltd. ('Viable' in short) have

approached this Court mainly against Paradip Port Trust and its

officers ('PPT' for short) and M/s. Bothra Shipping Service Pvt. Ltd

('Bothra' in short) with the main prayer to quash the decision of

the Tender Committee to award license for fourth HMC in favour

of M/s. Bothra.

The facts and contentions being similar in all the petitions,

relevant facts are taken from W.P.(C) No. 10308 of 2015.

3. The facts relevant for the present purpose are that PPT had

issued e-Tender or notice for online tender from eligible bidders

for grant of license for supply, installation, commissioning,

operation and maintenance of three 100 ton HMCs for five years

inside PPT. Bids were opened on 2.3.2015. According to Clause-9

of the tender documents, there was scope for amendment of bid

documents and, according to Clause-11, bidders were to quote

revenue sharing per ton in percent of Tariff Authority for Major

Ports ('TAMP' in short) rate. The highest revenue sharing offered

by the bidders were to be accepted and separate bids were

required to be submitted for each crane. By Clause-27, PPT

reserved the right to reduce the number of cranes required to be

deployed from 3 to 2 at the time of finalization of tender,

depending on prevailing situation. The PPT was to award the
-4-

contract to such bidders as were conforming to the techno-

commercially responsive and highest evaluated bids. It was

further indicated that the bidders shall have to match highest

quoted rate. The second highest bidder had the first right of

refusal and so on. If other bidders did not agree to match the

highest rate, fresh offers were to be invited through open tender.

4. By issuing addendum on 23.2.2015 to the tender notice, PPT

changed the dates of opening of the Tender and stipulated that

bidder or its subsidiary or its associate could participate for one

HMC only. By second addendum dated 24.2.2015 only time for the

opening of the tenders was changed to 16.00 hours on 7.3.2015.

5. On 25.3.2015, the Tender Committee consisting of six

officials of PPT met and found the petitioners and M/s. Bothra to

be qualified bidders with OSL being highest bidder offering 9% of

revenue sharing. Therefore, other bidders were called upon to

match the rate offered by the highest bidder. It was also

recommended by the Committee that in case all the bidders match

the highest rate then four numbers of HMC might be deployed as

against three, as there was further requirement. On the basis of

such minutes of the meeting, M/s. Bothra was issued the letter of

intent dated 28.3.2015 for grant of license for the fourth HMC.

6. The grievance of the petitioners is that fourth HMC was not

part of the tender-notice and hence award of contract and license

for the fourth HMC was contrary to the tender-notice and, it being
-5-

a State largess, it was awarded without due process to the

detriment and possible loss to the petitioners. Under such

circumstances, oblique motive and extraneous considerations

were alleged against the PPT. It is averred by the petitioners that

there was a hidden agenda to somehow accommodate M/s. Bothra

in view of cancellation of two earlier tender notice dated 12.8.2014

and 4.12.2014 wherein only two bidders participated. While HMC

could be procured and installed within a period of six months

M/s. Bothra was so sure of getting the award that they moved the

machine within a month. It is alleged that had there been an offer

to the petitioners, they could make available and install fourth

HMC, but before such opportunity arose, the addendum to the

tender notice was issued. It is also averred that variation in the

tonnage, the petitioner would get to handle with four new HMCs,

would cause loss of Rs.2 crores per annum to the petitioner.

7. As against the above case of the petitioner in the respective

writ petitions, PPT has contended that it had reserved the right to

reduce number of cranes required to be deployed from 3 to 2 at

the time of finalization of tender process, depending on the

prevailing situation. Licensees were to be permitted to install

HMCs inside port prohibited area to operate any cargo berths

depending on the operational requirement of the Port. It is averred

that PPT would ensure that quantity of cargo to be handled by the

HMCs during the financial year would be rationalized on the basis
-6-

of capacity as well as availability of HMCs, even as PPT did not

give any commitment to the bidders or licensees. That there was

adequate cargo for the petitioners and other crane operators to

function round the clock. Thus, no prejudice would be caused to

the petitioners, if the fourth HMC were allowed to operate in

public interest and to cope with higher target fixed for the port by

Ministry of Ports. On that basis, it is submitted that in view of

increasing traffic at the port and increasing period of break down

among the existing HMCs, the petitioners were not likely to suffer

any loss due to installation and operation of the fourth HMC.

8. By filing an affidavit of its Vice-President, M/s. Bothra,

respondent No.8 has opposed the petition with the contentions

that the issues raised by the petitioners are speculative,

misleading and based on suppression of material facts and

without the petitioner having a locus standi. It is submitted that

the petitioners have never raised any objection to the grant of

license for the fourth HMC to respondent no.8 and they are

estopped from raising objection at a belated stage as the

respondent has already invested substantial amount of money

and manpower in fulfillment of installation of the crane. That the

petitioners' pleas are not in public interest. That the number of

cranes mentioned in the tender notice in question was never

meant to be an essential term of the notice, even as the petitioners

have already been favoured with the contract. It is also submitted
-7-

that the tender committee had made its recommendation on

March 25, 2015 after hearing all the bidders and letters of intent

dated March 28,2015 were issued to all the four bidders, after

approval by the Chairman of PPT, who is the Chief Executive

Authority. M/s. Bothra has thereafter fulfilled the other conditions

for grant of license vide its letter dated 15.4.2015 and 27.4.2015.

That M/s. Bothra had already entered into a Memorandum of

Understanding on September 30,2014 long before the tender

notice in question, for supply of three HMCs from its supplier and

already entered into contract on 22.2.2015 for supply of one HMC

at Kakinada. After that, that HMC was requested to be diverted to

PPT and the HMC scheduled for delivery to Kakinada Port was

delivered at Paradip Port after award of letter of intent by PPT.

Thus, one HMC had already reached Paradip Port on 18.5.2015

and landed on 20.5.2015. Thereafter, commissioning and trial of

the HMC was completed on 8.6.2015 and test under the contract

was conducted on 11.6.2015 making the crane ready for

commercial operation on 19.6.2015. Thus, M/s. Bothra has

already incurred substantial expenditure in procuring, arranging

and commissioning the HMC as per the tender conditions and has

also furnished bank guarantee of Rs.1,20,00,000/- to PPT. It is

alleged that all the three petitioners are associates of one group

and have formed a cartel to prevent other operators from

functioning at PPT. Denying all the allegations made in the
-8-

petitions, it is submitted that the petitioners had, by suppressing

material facts, obtained an ex parte order on 10.6.2015 to

maintain status quo as on that date in respect of the letter of

intent dated 15.4.2015.

9. The following judgments and observations made therein were

cited and discussed at the bar during the course of arguments.

(a) Jagdish Mandal vs. State of Orissa & Ors, [(2007) 14
SCC 517].
"22. Judicial review of administrative action is
intended to prevent arbitrariness, irrationality,
unreasonableness, bias and mala fides. Its
purpose is to check whether choice or decision is
made "lawfully" and not to check whether choice
or decision is "sound". When the power of
judicial review is invoked in matters relating to
tenders or award of contracts, certain special
features should be borne in mind. A contract is a
commercial transaction. 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 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. The power of judicial
review will not be permitted to be invoked to
protect private interest at the cost of public
interest, or to decide contractual disputes. The
tenderer or contractor with a grievance can
always seek damages in a civil court. Attempts
by unsuccessful tenderers with imaginary
grievances, wounded pride and business rivalry,
to make mountains out of molehills of some
technical/procedural violation or some prejudice
to self, and persuade courts to interfere by
exercising power of judicial review, should be
resisted. Such interferences, either interim or
final, may hold up public works for years, or
delay relief and succour to thousands and
millions and may increase the project cost
manifold. Therefore, a court before interfering in
tender or contractual matters in exercise of
-9-

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";
(ii) Whether public interest is affected.
If the answers are in the negative, there
should be no interference under Article
226. Cases involving blacklisting or
imposition of penal consequences on a
tenderer/contractor or distribution of State
largesse (allotment of sites/shops, grant of
licences, dealerships and franchises) stand
on a different footing as they may require a
higher degree of fairness in action."

(b) R.N.Gosain v. Yashpal Dhir, [AIR 1993 SC 352]
"10. Law does not permit a person to both
approbate and reprobate. This principle is
based on the doctrine of election which
postulates that no party can accept and reject
the same instrument and that "a person cannot
say at one time that a transaction is valid and
thereby obtain some advantage, to which he
could only be entitled on the footing that it is
valid, and then turn round and say it is void for
the purpose of securing some other advantage".
[See : Verschures Creameries Ltd. v. Hull and
Netherlands Steamship Co. Ltd., (1921) 2 KB
608, 612 (CA) Scrutton, L.J.] According to
Halsbury's Laws of England, 4th Edn., Vol. 16,
"after taking an advantage under an order (for
example for the payment of costs) a party may
be precluded from saying that it is invalid and
asking to set it aside".
(c) Tata Cellular Vs. Union of India, [(1994)6 SCC 651]

"70. It cannot be denied that the principles of
judicial review would apply to the exercise of
contractual powers by Government bodies in
- 10 -

order to prevent arbitrariness or favouritism.
However, it must be clearly stated that there are
inherent limitations in exercise of that power of
judicial review. 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. But, the principles laid down
in Article 14 of the Constitution have to be kept
in view while accepting or refusing a tender.
There can be no question of 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.
Of course, if the said power is exercised for any
collateral purpose the exercise of that power will
be struck down."
"71. Judicial quest in administrative matters
has been to find the right balance between the
administrative discretion to decide matters
whether contractual or political in nature or
issues of social policy; thus they are not
essentially justiciable and the need to remedy
any unfairness. Such an unfairness is set right
by judicial review."
xxx xxx xxx
"73. Observance of judicial restraint is
currently the mood in England. The judicial
power of review is exercised to rein in any
unbridled executive functioning. The restraint
has two contemporary manifestations. One is the
ambit of judicial intervention; the other covers
the scope of the court's ability to quash an
administrative decision on its merits. These
restraints bear the hallmarks of judicial control
over administrative action."

(d) B.S.N.Joshi & Sons Ltd. v. Nair Coal Services Ltd.,
[(2006)11 SCC 548]

"69. While saying so, however, we would like
to observe that having regard to the fact that
huge public money is involved, a public sector
undertaking in view of the principles of good
corporate governance may accept such tenders
which are economically beneficial to it. It may be
true that essential terms of the contract were
required to be fulfilled. If a party failed and/or
neglected to comply with the requisite conditions
- 11 -

which were essential for consideration of its case
by the employer, it cannot supply the details at a
later stage or quote a lower rate upon
ascertaining the rate quoted by others. Whether
an employer has power of relaxation must be
found out not only from the terms of the notice
inviting tender but also the general practice
prevailing in India. For the said purpose, the
court may consider the practice prevailing in the
past. Keeping in view a particular object, if in
effect and substance it is found that the offer
made by one of the bidders substantially satisfies
the requirements of the conditions of notice
inviting tender, the employer may be said to have
a general power of relaxation in that behalf. Once
such a power is exercised, one of the questions
which would arise for consideration by the
superior courts would be as to whether exercise
of such power was fair, reasonable and bona
fide. If the answer thereto is not in the negative,
save and except for sufficient and cogent
reasons, the writ courts would be well advised to
refrain themselves in exercise of their
discretionary jurisdiction."
(e) Raunaq International Ltd. v. I.V.R.Construction
Ltd. & ors, (AIR 1990 SC 393)

"11. When a writ petition is filed in the High
Court challenging the award of a contract by a
public authority or the State, the court must be
satisfied that there is some element of public
interest involved in entertaining such a petition.
If, for example, the dispute is purely between two
tenderers, the court must be very careful to see if
there is any element of public interest involved in
the litigation. A mere difference in the prices
offered by the two tenderers may or may not be
decisive in deciding whether any public interest
is involved in intervening in such a commercial
transaction. It is important to bear in mind that
by court intervention, the proposed project may
be considerably delayed thus escalating the cost
far more than any saving which the court would
ultimately effect in public money by deciding the
dispute in favour of one tenderer or the other
tenderer. Therefore, unless the court is satisfied
that there is a substantial amount of public
interest, or the transaction is entered into mala
- 12 -

fide, the court should not intervene under Article
226 in disputes between two rival tenderers.
xxx xxx xxx
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.
14. Where there is an allegation of mala fides or
an allegation that the contract has been entered
into for collateral purposes and the court is
satisfied on the material before it that the
allegation needs further examination, the court
would be entitled to entertain the petition. But
even here, the court must weigh the
consequences in balance before granting interim
orders.
15. Where the decision-making process has been
structured and the tender conditions set out the
requirements, the court is entitled to examine
whether these requirements have been
considered. However, if any relaxation is granted
for bona fide reasons, the tender conditions
permit such relaxation and the decision is
arrived at for legitimate reasons after a fair
consideration of all offers, the court should
hesitate to intervene."

(f) Natural Resources Allocation, In re, Special
Reference No.1 of 2012, [(2012)10 SCC 1.]

"98. However, after the judgment of this Court in
E.P. Royappa v. State of T.N.(1974) 4 SCC 3 the
"arbitrariness" doctrine was introduced which
dropped a pedantic approach towards equality
and held the mere existence of arbitrariness as
violative of Article 14, however equal in its
treatment. Bhagwati, J. (as His Lordship then
was) articulated the dynamic nature of equality
and borrowing from Shakespeare's Macbeth***,
said that the concept must not be "cribbed,
cabined and confined" within doctrinaire limits:
(SCC p. 38, para 85)
"85. ... Now, what is the content and reach of
this great equalising principle? It is a founding
- 13 -

faith, to use the words of Bose, J., 'a way of life',
and it must not be subjected to a narrow
pedantic or lexicographic approach. We cannot
countenance any attempt to truncate its all-
embracing scope and meaning, for to do so
would be to violate its activist magnitude.
Equality is a dynamic concept with many aspects
and dimensions and it cannot be 'cribbed,
cabined and confined' within traditional and
doctrinaire limits."
His Lordship went on to explain the length and
breadth of Article 14 in the following lucid words:
(Royappa case, SCC p. 38, para 85)
"85. ... From a positivistic point of view, equality
is antithetic to arbitrariness. In fact equality and
arbitrariness are sworn enemies; one belongs to
the rule of law in a republic while the other, to
the whim and caprice of an absolute monarch.
Where an act is arbitrary, it is implicit in it that
it is unequal both according to political logic and
constitutional law and is therefore violative of
Article 14, and if it affects any matter relating to
public employment, it is also violative of Article
16. Articles 14 and 16 strike at arbitrariness in
State action and ensure fairness and equality of
treatment. They require that State action must
be based on valid relevant principles applicable
alike to all similarly situate and it must not be
guided by any extraneous or irrelevant
considerations because that would be denial of
equality. Where the operative reason for State
action, as distinguished from motive inducing
from the antechamber of the mind, is not
legitimate and relevant but is extraneous and
outside the area of permissible considerations, it
would amount to mala fide exercise of power and
that is hit by Articles 14 and 16. Mala fide
exercise of power and arbitrariness are different
lethal radiations emanating from the same vice:
in fact the latter comprehends the former. Both
are inhibited by Articles 14 and 16."
xxx xxx xxx
"105. However, this Court has also alerted
against the arbitrary use of the "arbitrariness"
doctrine. Typically, laws are struck down for
violating Part III of the Constitution of India,
legislative incompetence or excessive delegation.
However, since Royappa case, the doctrine has
- 14 -

been loosely applied. This Court in State of A.P.
v. McDowell & Co.(1996)3 SCC 709 stressed on
the need for an objective and scientific analysis
of arbitrariness, especially while striking down
legislations. Jeevan Reddy, J. observed: (SCC pp.
737-38, para 43)
"43. ... The power of Parliament or for
that matter, the State Legislatures is
restricted in two ways. A law made by
Parliament or the legislature can be
struck down by courts on two grounds
and two grounds alone viz. (1) lack of
legislative competence and (2) violation of
any of the fundamental rights guaranteed
in Part III of the Constitution or of any
other constitutional provision. There is no
third ground. We do not wish to enter into
a discussion of the concepts of procedural
unreasonableness and substantive
unreasonableness--concepts inspired by
the decisions of United States Supreme
Court. Even in USA, these concepts and
in particular the concept of substantive
due process have proved to be of
unending controversy, the latest thinking
tending towards a severe curtailment of
this ground (substantive due process).
The main criticism against the ground of
substantive due process being that it
seeks to set up the courts as arbiters of
the wisdom of the legislature in enacting
the particular piece of legislation. It is
enough for us to say that by whatever
name it is characterised, the ground of
invalidation must fall within the four
corners of the two grounds mentioned
above. In other words, say, if an
enactment is challenged as violative of
Article 14, it can be struck down only if it
is found that it is violative of the equality
clause/equal protection clause enshrined
therein. Similarly, if an enactment is
challenged as violative of any of the
fundamental rights guaranteed by
clauses (a) to (g) of Article 19(1), it can be
struck down only if it is found not saved
by any of the clauses (2) to (6) of Article
19 and so on. No enactment can be
struck down by just saying that it is
arbitrary or unreasonable. Some or other
- 15 -

constitutional infirmity has to be found
before invalidating an Act. An enactment
cannot be struck down on the ground
that court thinks it unjustified.
Parliament and the legislatures,
composed as they are of the
representatives of the people, are
supposed to know and be aware of the
needs of the people and what is good and
bad for them. The court cannot sit in
judgment over their wisdom. In this
connection, it should be remembered that
even in the case of administrative action,
the scope of judicial review is limited to
three grounds viz. (i) unreasonableness,
which can more appropriately be called
irrationality, (ii) illegality and (iii)
procedural impropriety (see Council of
Civil Service Unions v. Minister for the Civil
Service, 1985 AC 374 which decision has
been accepted by this Court as well)."

xxx xxx xxx

"107. From a scrutiny of the trend of decisions it
is clearly perceivable that the action of the State,
whether it relates to distribution of largesse,
grant of contracts or allotment of land, is to be
tested on the touchstone of Article 14 of the
Constitution. A law may not be struck down for
being arbitrary without the pointing out of a
constitutional infirmity as McDowell case has
said. Therefore, a State action has to be tested
for constitutional infirmities qua Article 14 of the
Constitution. The action has to be fair,
reasonable, non-discriminatory, transparent,
non-capricious, unbiased, without favouritism or
nepotism, in pursuit of promotion of healthy
competition and equitable treatment. It should
conform to the norms which are rational,
informed with reasons and guided by public
interest, etc. All these principles are inherent in
the fundamental conception of Article 14. This is
the mandate of Article 14 of the Constitution of
India.
xxx xxx xxx

"167. In chronological sequence, the learned
counsel then cited Mahabir Auto Stores v. Indian
- 16 -

Oil Corpn. (1990) 3 SCC 752. Relevant
observations made therein, with reference to the
present controversy, are being placed below:
(SCC pp. 760-61 & 763-64, paras 12, 17-20 &
23)
"12. It is well settled that every action of the
State or an instrumentality of the State in
exercise of its executive power, must be
informed by reason. In appropriate cases,
actions uninformed by reason may be
questioned as arbitrary in proceedings
under Article 226 or Article 32 of the
Constitution. Reliance in this connection
may be placed on the observations of this
Court in Radhakrishna Agarwal v. State of
Bihar, (1977)3 SCC 457. It appears to us, at
the outset, that in the facts and
circumstances of the case, the respondent
Company IOC is an organ of the State or an
instrumentality of the State as contemplated
under Article 12 of the Constitution. The
State acts in its executive power under Article
298 of the Constitution in entering or not
entering in contracts with individual parties.
Article 14 of the Constitution would be
applicable to those exercises of power.
Therefore, the action of State organ under
Article 14 can be checked. See
Radhakrishna Agarwal v. State of Bihar at
p. 462, but Article 14 of the Constitution
cannot and has not been construed as a
charter for judicial review of State action
after the contract has been entered into, to
call upon the State to account for its actions
in its manifold activities by stating reasons
for such actions. In a situation of this
nature certain activities of the respondent
Company which constituted State under
Article 12 of the Constitution may be in
certain circumstances subject to Article 14
of the Constitution in entering or not
entering into contracts and must be
reasonable and taken only upon lawful and
relevant consideration; it depends upon
facts and circumstances of a particular
transaction whether hearing is necessary
and reasons have to be stated. In case any
right conferred on the citizens which is
sought to be interfered, such action is
subject to Article 14 of the Constitution, and
- 17 -

must be reasonable and can be taken only
upon lawful and relevant grounds of public
interest. Where there is arbitrariness in State
action of this type of entering or not entering
into contracts, Article 14 springs up and
judicial review strikes such an action down.
Every action of the State executive authority
must be subject to rule of law and must be
informed by reason. So, whatever be the
activity of the public authority, in such
monopoly or semi-monopoly dealings, it
should meet the test of Article 14 of the
Constitution. If a governmental action even in
the matters of entering or not entering into
contracts, fails to satisfy the test of
reasonableness, the same would be
unreasonable. In this connection reference
may be made to E.P. Royappa v. State of
T.N., Maneka Gandhi v. Union of India,
(1978)1 SCC 248 , Ajay Hasia v. Khalid
Mujib Sehravardi (1981)1 SCC 72, Ramana
Dayaram Shetty v. International Airport
Authority of India,(1979)3 SCC 489 and also
Dwarkadas Marfatia and Sons v. Port of
Bombay (1989)3 SCC 293. It appears to us
that rule of reason and rule against
arbitrariness and discrimination, rules of
fair play and natural justice are part of the
rule of law applicable in situation or action
by State instrumentality in dealing with
citizens in a situation like the present one.
Even though the rights of the citizens are in
the nature of contractual rights, the manner,
the method and motive of a decision of
entering or not entering into a contract, are
subject to judicial review on the touchstone of
relevance and reasonableness, fair play,
natural justice, equality and non-
discrimination in the type of the transactions
and nature of the dealing as in the present
case.

"17. We are of the opinion that in all such
cases whether public law or private law
rights are involved, depends upon the facts
and circumstances of the case. The
dichotomy between rights and remedies
cannot be obliterated by any straitjacket
formula. It has to be examined in each
particular case. Mr Salve sought to urge
- 18 -

that there are certain cases under Article 14
of arbitrary exercise of such 'power' and not
cases of exercise of a 'right' arising either
under a contract or under a statute. We are
of the opinion that that would depend upon
the factual matrix.
"18. Having considered the facts and
circumstances of the case and the nature of
the contentions and the dealing between the
parties and in view of the present state of
law, we are of the opinion that decision of the
State/public authority under Article 298 of
the Constitution, is an administrative
decision and can be impeached on the
ground that the decision is arbitrary or
violative of Article 14 of the Constitution of
India on any of the grounds available in
public law field. It appears to us that in
respect of corporation like IOC when
without informing the parties concerned, as
in the case of the appellant firm herein on
alleged change of policy and on that basis
action to seek to bring to an end to course
of transaction over 18 years involving large
amounts of money is not fair action,
especially in view of the monopolistic nature
of the power of the respondent in this field.
Therefore, it is necessary to reiterate that
even in the field of public law, the relevant
persons concerned or to be affected, should
be taken into confidence. Whether and in
what circumstances that confidence should
be taken into consideration cannot be laid
down on any straitjacket basis. It depends
on the nature of the right involved and nature
of the power sought to be exercised in a
particular situation. It is true that there is
discrimination between power and right but
whether the State or the instrumentality of a
State has the right to function in public field
or private field is a matter which, in our
opinion, depends upon the facts and
circumstances of the situation, but such
exercise of power cannot be dealt with by the
State or the instrumentality of the State
without informing and taking into confidence,
the party whose rights and powers are
affected or sought to be affected, into
confidence. In such situations most often
- 19 -

people feel aggrieved by exclusion of
knowledge if not taken into confidence.
"19. Such transaction should continue as
an administrative decision with the organ of
the State. It may be contractual or statutory
but in a situation of transaction between the
parties for nearly two decades, such
procedure should be followed which will be
reasonable, fair and just, that is, the process
which normally be accepted (sic is expected)
to be followed by an organ of the State and
that process must be conscious and all those
affected should be taken into confidence.
"20. Having regard to the nature of the
transaction, we are of the opinion that it
would be appropriate to state that in cases
where the instrumentality of the State
enters the contractual field, it should be
governed by the incidence of the contract. It
is true that it may not be necessary to give
reasons but, in our opinion, in the field of
this nature fairness must be there to the
parties concerned, and having regard to the
large number or the long period and the
nature of the dealings between the parties,
the appellant should have been taken into
confidence. Equality and fairness at least
demands this much from an instrumentality
of the State dealing with a right of the State
not to treat the contract as subsisting. We
must, however, evolve such process which
will work.
xxx xxx xxx
"23. It is not our decision which is important
but a decision on the above basis should be
arrived at which should be fair, just and
reasonable--and consistent with good
Government--which will be arrived at fairly
and should be taken after taking the persons
concerned whose rights/obligations are
affected, into confidence. Fairness in such
action should be perceptible, if not
transparent."
- 20 -

(g) Ram and Shyam Company v. State of Haryana
& ors., (AIR 1985 SC 1147)

"12. Let us put into focus the clearly
demarcated approach that distinguishes the
use and disposal of private property and
socialist property. Owner of private property
may deal with it in any manner he likes
without causing injury to any one else. But
the socialist or if that word is jarring to some,
the community or further the public property
has to be dealt with for public purpose and in
public interest. The marked difference lies in
this that while the owner of private property
may have a number of considerations which
may permit him to dispose of his property for
a song. On the other hand, disposal of public
property partakes the character of a trust in
that in its disposal there should be nothing
hanky panky and that it must be done at the
best price so that larger revenue coming into
the coffers of the State administration would
serve public purpose viz. the welfare State
may be able to expand its beneficent
activities by the availability of larger funds.
This is subject to one important limitation
that socialist property may be disposed at a
price lower than the market price or even for
a token price to achieve some defined
constitutionally recognised public purpose,
one such being to achieve the goals set out in
Part IV of the Constitution. But where
disposal is for augmentation of revenue and
nothing else, the State is under an obligation
to secure the best market price available in a
market economy. An owner of private
property need not auction it nor is he bound
to dispose it of at a current market price.
Factors such as personal attachment, or
affinity, kinship, empathy, religious
sentiment or limiting the choice to whom he
may be willing to sell, may permit him to sell
the property at a song and without demur. A
welfare State as the owner of the public
property has no such freedom while
disposing of the public property. A welfare
State exists for the largest good of the largest
number more so when it proclaims to be a
socialist State dedicated to eradication of
poverty. All its attempt must be to obtain the
- 21 -

best available price while disposing of its
property because the greater the revenue, the
welfare activities will get a fillip and shot in
the arm. Financial constraint may weaken
the tempo of activities. Such an approach
serves the larger public purpose of expanding
welfare activities primarily for which the
Constitution envisages the setting up of a
welfare State. In this connection we may
profitably refer to Ramana Dayaram Shetty v.
International Airport Authority of India6 in
which Bhagwati, J.

speaking for the Court observed: (SCC p. 506, para 12) "It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largesse including award of jobs, contracts, quotas, licences etc. must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory."

xxx xxx xxx "At one stage, it was observed that the Government is not free like an ordinary individual, in selecting recipient for its largesse and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The law is now well-settled that the Government

- 22 -

need not deal with anyone, but if it does so, it must do so fairly and without discretion and without unfair procedure. Let it be made distinctly clear that Respondent 4 was not selected for any special purpose or to satisfy any Directive Principles of State Policy. He surreptitiously ingratiated himself by a back- door entry giving a minor raise in the bid and in the process usurped the most undeserved benefit which was exposed to the hilt in the court. Only a blind can refuse to perceive it."

(h) M/s.Michigan Rubber(India)Ltd. v. State of Karnataka, (AIR 2012 SC 2915.) "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 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 the 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 the 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

- 23 -

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 a fundamental right to carry on business with the Government.

(i) Arup Das & ors., v. State of Assam & ors., (2012)5 SCC 559.

"17. It is well established that an authority cannot make any selection/appointment beyond the number of posts advertised, even if there were a larger number of posts available than those advertised. The principle behind the said decision is that if that was allowed to be done, such action would be entirely arbitrary and violative of Articles 14 and 16 of the Constitution, since other candidates who had chosen not to apply for the vacant posts which were being sought to be filled, could have also applied if they had known that the other vacancies would also be under consideration for being filled up."

(j) M/s. Coal India Ltd. & ors. v. Alok Fuels(P) Ltd, [(2010) 10 SCC157.] "25. It is settled by a series of decisions of this Court starting from Shrilekha Vidyarthi v. State of U.P, (1991)1 SCC 212 that even in the domain of contractual matters, the High Court can entertain a writ petition on the ground of violation of Article 14 of the Constitution when the impugned act of the State or its instrumentality is arbitrary, unfair or unreasonable or in breach of obligations under public law.

"26. In Sterling Computers Ltd. v. M&N Publications Ltd. (1993)1 SCC 445 in SCC para 28, however, this Court held: (SCC p.

464) "28. Philanthropy is no part of the management of an undertaking, while dealing with a contractor entrusted with

- 24 -

the execution of a contract. The supply of the directories to public in time, was a public service which was being affected by the liberal attitude of the MTNL and due to the condonation of delay on the part of the UIP/UDI. There was no justification on the part of the MTNL to become benevolent by entering into the supplemental agreement with no apparent benefit to the MTNL, without inviting fresh tenders from intending persons to perform the same job for the next five years. Public authorities are essentially different from those of private persons. Even while taking decision in respect of commercial transactions a public authority must be guided by relevant considerations and not by irrelevant ones. If such decision is influenced by extraneous considerations which it ought not to have taken into account the ultimate decision is bound to be vitiated, even if it is established that such decision had been taken without bias. The contract awarded for the publication of the directories had not only a commercial object but had a public element at the same time i.e. to supply the directories to lakhs of subscribers of telephones in Delhi and Bombay, every year within the stipulated time free of cost. In such a situation MTNL could not exercise an unfettered discretion after the repeated breaches committed by UIP/UDI, by entering into a supplemental agreement with the Sterling for a fresh period of more than five years on terms which were only beneficial to UIP/UDI/Sterling with corresponding no benefit to MTNL, which they have realised only after the High Court went into the matter in detail in its judgment under appeal.

10. Considering the relevant facts in light of the contentions of the parties and the legal dicta extracted hereinabove, it would appear that besides the grievance of the petitioners against the grant of

- 25 -

fourth HMC to M/s. Bothra, challenge is to induct M/s. Bothra into PPT beyond the terms of the tender and without the fourth HMC being subjected to tender process. There is no dispute about the facts that PPT had reserved its right to reduce the number of cranes to be put for tender process from 3 to 2 at the time of finalization of the tender and the prevailing situation was relevant only for that purpose. There was no stipulation for bringing in a fourth HMC by the same tender process initiated by e-Tender call notice issued on 13.2.2015. By the addendum to that notice the bidders and their associates could participate in one HMC only. Thus, the consideration of the tenders by the tender committee was restricted to evaluating the bids for 3 to 2 HMCs only and bidders were restricted to bid for one HMC only. These conditions were significant in the context of requirement of the bids to make offers on revenue sharing basis per tons of cargo to be handled by each HMC, while overall rates were fixed by TAMP. In these circumstances, consideration of bid for the fourth HMC by the tender committee was unreasonable, arbitrary and without authority. Induction of fourth HMC was bound to affect the quantum of cargo to be handled by the three HMCs for which offers were invited. Therefore, it was unfair and unreasonable to refashion handling of cargo by four HMC and it would obviously prejudicially affect the prospect of profit out of three HMCs duly selected by the tender process. Consideration of offer for fourth HMC, without a proper tendering process for the purpose, also

- 26 -

denied equality of opportunity to the other prospective bidders and therefore, it could not be said to be in public interest either.

11. An executive authority which is State within the definition of Article-12 must be rigorously held to the standards by which it professes its actions to be judged. There was a public law element in the tender process and selection in question obviously lacked in fairness, equality and fair procedure. Since the bids were on revenue sharing basis, there was inherent element of largess in awarding the contract for installation and operation of HMCs in the prohibited area of PPT. In view of these considerations, not only the number of HMCs to be deployed at PPT was essential condition of the notice calling for tender, but consideration of offer of the fourth HMC was in violation of the tender conditions, particularly Clause-27 which reads as under:-

"Clause-27- AWARD CRITERIA The officer inviting the bid on behalf of Paradip Port Trust will award the contract to the bidder whose bid has been evaluated to be techno-commercial responsive and the highest evaluated Bid. A system generated e-mail will be communicated to the successful bidder and un- successful bidder regarding their status. In case of different revenue sharing offered for the same type of crane by different bidders then the highest offer by the bidder shall prevail. Then for the same type of cranes, other bidders shall have to match the highest quoted price. The H2 bidder will be given the first right of refusal and so on. In the event no other bidders agreed to match the highest offered price for a particular type of crane then fresh offers shall be invited through open tender.

Paradip Port reserves the right to reduce the no. of the cranes required to be deployed from 3 to 2 at the time of finalization of this tender depending on the prevailing situation."

- 27 -

In the facts of this case M/s. Bothra Shipping Service Pvt. was the third bidder who came forward to match the highest quoted price, but it was the lowest bidder for whom no occasion to match the bid arose.

12. It may be pertinent to note here that PPT has not placed any material to justify the requirement by PPT of one more HMC, over and above three additional HMCs which were put up for tender process.

Mere plea and prospect of higher amount of handling of cargo at PPT, as pleaded by PPT did not justify any variation in the conditions of tender in public interest. On the other hand, PPT could not have in fact or in law assure the petitioners of enough work round the clock for the three petitioners. Under such circumstances, some under-hand dealing and prior understanding could be inferred from the demeanours of the tender committee and M/s. Bothra in so far as orders were already placed by M/s. Bothra in advance and the fourth HMC was diverted from Kakinada to PPT to install it and make it operational much ahead of the appointed time. Thus, infringement of Article 14 is writ large in the sequence of events, particularly when no general power or privilege for changing the number of HMCs is claimed or substantiated. Even if such power were asserted or assumed, exercise thereof would not be fair from bona fide in the facts of the case. As held in Special Reference No.1 of 2012, [(2012)10 SCC 1 supra, action of the authority has to be tested on the touchstone of Article 14 of the Constitution. The action has to be fair, reasonable, non-discriminatory, transparent, non-

capricious, unbiased, without favouritism or nepotism and in pursuit of promotion of healthy competition and equitable treatment. That

- 28 -

mandate of Article 14 is clearly violated by PPT to the benefit of M/s.

Bothra Shipping Service Pvt. and to the detriment of the petitioners. It is also not proved on record that the petitioners were taken into confidence before the bids were evaluated and the tender committee had decided to issue licence for the fourth HMC.

13. For the reasons recorded hereinabove and in view of the ratio of the judgment discussed hereinabove and to ensure sanctity of letters of intent and agreements entered into with the petitioner, letter of intent issued to the respondent no.8-M/s. Bothra Shipping Service Pvt. Ltd. has to be quashed regardless of the arrangements made and expenditures incurred by them for bringing in and making operational the fourth HMC.

14. Accordingly, petitions are allowed and the letter of intent dated 28.3.2015 for grant of license issued by the Executive Engineer, Workshop Division of the Paradip Port Trust to M/s.

Bothra Shipping Service Pvt. Ltd. along with transactions consequential thereto are all set aside as illegal and arbitrary as far as the parties herein are concerned. There is no order as to cost.

..........................

                                                                  CHIEF JUSTICE

Biswanath Rath, J.         I agree.


                                                                  ...........................
                                                                    JUDGE


          Orissa High Court, Cuttack
          The 27th day of July 2015/DMoharana

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