Telangana High Court
Kr Vijay Kumar And 6 Others vs The State Of Telangana And 29 Others on 1 August, 2022
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
THE HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
WRIT PETITION Nos.20391, 21260, 21340, 21410, 22531,
22559, 22793, 23424, 23428 and 23550 of 2022
COMMON ORDER:
As the grievance of the petitioners in all these writ petitions is similar and the issues involved therein are also common, the writ petitions are disposed of by this common order.
2. The petitioners herein are aggrieved by the Memo.No.134/C/2022 dated 04.04.2022 issued by the respondent No.1, Circular RC.No.13210/T.Sec/DNE/Diet/2022 dated 07.04.2022 issued by the respondent No.2 and the consequential notice in RC.NMo.HDS/Diet/GHS/2022/964 dated 12.04.2022 issued by the respondent No.4 and consequential tender notice dated 16.04.2022 issued by the respondent No.3 vide Tender No.HDS/GHS/2022/942 and the individual consequential notices issued to each of the petitioners terminating their contract. The petitioners contend that the aforesaid action of the respondents is in violation of principles of natural justice and contrary to the terms and conditions of the various contract agreements and G.O.Ms.No.34 dated 21.02.2022.
3. The facts in WP.No.20391 of 2022, which is taken as a lead case, are set out in brief as under in order to avoid repetition. 2
(a) The case of the petitioner is that she is an existing contractor, being successful tenderer, in respect of supply of diet in the respondent No.4-hospital. The respondents No.3 and 4 issued tender for supply of diet vide Tender Notification RC.No.HDS/GHS/2021/1955 dated 23.09.2021 in the respondent No.4-hospital. Petitioner participated in the tender and after due process, she was awarded the contract. The petitioner was issued letter of award No. HDS/GHS/2021/1955/136 dated 20,.01.2022 and the contract period is for three years from the date of commencement. Consequent upon the letter of award, a contract agreement was entered into between the respondent No.3 and the petitioner on 20.01.2022. Vide letter dated 21.01.2022, the diet premises was handed over to the petitioner. The petitioner was directed to submit caution deposit of Rs.5 lakhs and accordingly, she deposited the said sum vide DD.No.20543 dated 21.01.2022.
(b) It is contended by the petitioner that the contract of the petitioner was for supplying diet with effect from 21.01.2022 and the contract is valid up to 20.01.2024. Article 9 of the tender document deals with the events of default and consequences.
It contains that non-compliance of the terms and conditions or to discharge the obligation by both parties, shall amount to default on the part of such party as defined therein. Clause (a) of Article 9 provides that in the event of default, the Hyderabad District Diet 3 Management Committee (HDMC) shall be entitled to levy penalty equivalent to 10% of the overall payment of the day and if such default occurs twice, the agreement can be terminated by issuing prior notice of three days. Under clause (b) of Article 9 it is provided that if HDMC commits any default, the contractor is entitled to terminate the agreement by issuing termination notice.
(c) The Government issued G.O.Ms.No.34 Health, Medical and Family Welfare (C2) Department dated 21.03.2022 wherein orders were issued streamlining the management system for delivery of nutritious food to inpatients in all Government hospitals and health centres under the control of HM&FW Department, besides increasing the diet charges and specified new diet schedule. In terms of the recommendations of the respondent No.2, vide aforesaid G.O., the diet charges were enhanced to provide quality diet to the various categories of the patients and duty doctors in all government hospitals and health centres. In the said G.O., it was made clear that the remaining conditions/guidelines issued in earlier G.O.Ms.No.325 HM&WF (M1) Department dated 01.11.2021 shall continue.
(d) It is stated that the respondent No.1 issued Memo No.134/C2/2022 dated 04.04.2022 wherein the respondent No.1 accorded permission to the respondent No.2 and Commissioner, TVVP, Hyderabad cancelling the existing diet contracts by giving 4 one month notice to the contractors and simultaneously issued fresh tender for diet contracts as per G.O.Ms.No.34 dated 21.03.2022.
(e) It is the case of the petitioner that as per G.O.Ms.No.34 dated 21.03.2022, the contract of the petitioner cannot be cancelled, as the G.O. only relates to enhancement of diet charges. Therefore, the memo dated 04.04.2022 issued by the respondent No.1 is contrary to G.O.Ms.No.34 dated 21.03.2022 inasmuch as all the remaining conditions and guidelines issued in G.O.Ms.No.325 dated 01.11.2011 were continued.
(f) It is submitted that the diet contract was issued to the petitioner by following the procedure contemplated under G.O.Ms.No.325 dated 01.11.2021. As a consequence of memo dated 04.04.2022, the Director of Medical Education issued Circular Rc.No.13210/TSec./DME/Diet/2022 dated 07.04.2022 whereunder necessary instructions were issued to go for fresh tenders for diet contracts and to terminate the existing contract by giving one month notice. Consequently, the respondent No.4 issued notice dated 12.04.2022 giving one month advance notice to the petitioner for termination of her diet contract.
(g) It is stated that the petitioner incurred huge investment for commencement of diet contract by procuring labour and other infrastructure. The reasons mentioned in the termination order are 5 contrary to the terms and conditions of the agreement dated 21.01.2022. During the year 2011, the diet charges were enhanced and under G.O.Ms.No.325 dated 01.11.2011, the then existing diet contractors were asked to supply the diet at the enhanced rates but the contracts were not cancelled. But surprisingly, without following the said procedure, fresh tenders are now called for and scheduled is fixed. The date of issuance of tender document is between 18.04.2022 and 25.04.2022. The due date for submission of tender is 25.04.2022. The technical bid will be opened on 26.04.2022 and financial bid will be opened on 27.04.2022. It is further contended that the contract of the petitioner was not terminated by following due process of law. The petitioner was not issued any notice before terminating the contract, which is contrary to Article 9 of the contract agreement dated 21.01.2022.
4. This Court granted interim order on 21.04.2022 directing the respondents not to finalize the tenders till 25.04.2022. Thereafter, the interim order was extended from time to time.
5. In the counter of the respondent No.1 (filed in WP.No.21410 of 2022 and adopted in other writ petitions), it is contended that there are 192 major Government run hospitals. Out of these, 29 hospitals are under the direct supervision of the Director of Medical Education since they are teaching hospitals. The remaining 6 163 major non-teaching hospitals are under the purview of the Telangana Vaidya Vidhana Parishad (TVVP). In all these hospitals, the Government provides diet to the inpatients and doctors free of cost. Towards this objective and for effective implementation of the supply of the supply of diet to the inpatients and duty doctors in all Government hospitals and medical institutions, guidelines were issued by the erstwhile Government of Andhra Pradesh vide G.O.Ms.No.325 Health, Medical and Family Welfare (M1) Department dated 01.11.2011. The existing rates as fixed G.O.Ms.No.325 dated 01.11.2011 were doubled by the Government of Telangana vide G.O.Ms.No.34 Health, Medical and Family Welfare (C2) Department dated 21.03.2022. The enhancement was consequent to the recommendations of the committee constituted to submit changes/modifications to the earlier G.O. The orders issued vide G.O.Ms.No.34 dated 21.03.2022 are in the nature of a policy decision of the Government aimed at improving/enhancing the quality of diet provided to the inpatients and doctors in the Government hospitals. The said G.O. is in tune with the Directive Principles of State Policy as enshrined in the Constitution of India.
6. It is further stated that the dietary needs of the inpatients and doctors were hitherto catered for by different entities/agencies who entered into agreements with the hospitals under previous policy as per G.O.Ms.No.325 dated 01.11.2011. A memo dated 7 0404.2022 was issued by the Government permitting the DME and Commissioner of TVVP to cancel the existing diet contract by giving one month notice to the contractors. Simultaneously, directions were issued for inviting fresh tenders for diet contracts. Out of 29 hospitals under the control of DME, where fresh tenders have been called, contracts have been entered with respect to 11 hospitals with the enhanced rates and new menu and the contractors have begum supplying the diet to the inpatients as per new menu. Similarly, for 163 hospitals under the control of TVVP, fresh tenders have been called and the same have been finalized in 136 hospitals and fresh contracts have been entered with the enhanced rates and new menu. In respect of 13 hospitals under the control of DME and 25 hospitals under the control of TVVP, the process of calling for fresh tenders has been stalled in view of the writ petitions, which are pending before this Court. The diet under the enhanced rates is better than what supplied earlier. If the interim orders are continued, the inpatients in the hospitals will be deprived of better nutrition.
7. The claim of the petitioners that Article 9 of the agreement provides for termination and three months advance notice is required is without any basis. Article 10(a) enables the respondents to terminate the agreement with three months advance notice and the same is independent of Article 9 and does not relate to any 8 event of default. The termination has to be viewed in the objective of brining uniformity among all hospitals while implementing the enhanced rates for diet. This Court under Article 226 of the Constitution of India may refuse to interfere in contractual disputes. There is no element of inequality or arbitrariness or violation of fundamental rights. The averments in the writ affidavits do not even remotely indicate that the action was actuated by bias or malafides. The bonafide termination of a concluded contract may give rise to a cause for a breach of contract and consequential action under law of contract. Where the question of policy decision of the Government is involved, the Courts would refrain from interfering with such policy in the absence of any arbitrariness in the State action.
8. Mr. E. Madan Mohan Rao, learned senior counsel appearing for the petitioner, submitted that the contract of the petitioner is valid for a period of two years from the date of commencement as per clause 2.1 of Article 2 of the tender document. The contract period may be extended by HDMC not exceeding one year on mutually agreed terms and conditions. As per Article 10(a), either party may terminate the contract with three months advance notice. The contract of the petitioner commenced from January 2022. The termination notice was issued on 12.04.2022. Learned senior counsel contended that the termination is contrary to 9 G.O.Ms.No.34 dated 21.03.2022. The said G.O. only enhanced the existing diet rates but never directed cancellation of existing contracts. The action of the respondents in cancelling the contract of the petitioner is arbitrary. There is no objective criteria laid down by the respondents for cancelling the contract under G.O.Ms.No.325 dated 01.11.2022. Learned senior counsel relied upon a decision of the Supreme Court in SHRILEKHA VIDYARTHI v. STATE OF UTTAR PRADESH1.
9. Mr. S. Rahul Reddy, learned counsel for the petitioners in WP.Nos.22559 and 2293 of 2022 submitted that the impugned action of the respondents is in violation of Section 23 of the Contract Act. The respondents are bound by G.O.Ms.No.325 dated 01.11.2011 and cannot impose conditions beyond the said G.O. The said G.O.Ms.No.325 dated 01.11.2011 has to be taken as a guiding law and clauses of the contract cannot override G.O.Ms.No.325 dated 01.11.2011.
10. On the other hand, Mr. A. Santosh Kumar, learned Special Government Pleader, submitted that under G.O.Ms.No.34 dated 21.03.2022 the Government decided to accept the recommendations of the committee, which was constituted to examine the changes/modifications in the diet and to deliver 1 1990 LawSuit (SC) 539 10 nutritious food to the inpatients in Government hospitals besides increasing diet charges. Accepting the recommendations of the committee, the Government decided to enhance the diet charges to provide quality diet to various categories of patients and duty doctors in all Government hospitals and all health centres under the control of HM&FW Department. Clause 10 of the tender document provides that either party may terminate the contract by issuing three months advance notice. Under memo dated 04.04.2022 it was decided to cancel the existing contracts, which were entered into based on old rates and further to identify new agencies based on new rates.
11. Learned Special Government Pleader relied upon a decision of the Supreme Court in YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMENT AUHTORITY v. SHAKUNTALA EDUCATION AND WELFARE SOCIETY [CIVIL APPEAL Nos.4178-4197 of 2022 dated 19.05.2022] and submitted that as policy decision is taken by the Government to improve and provide nutritious diet to the inpatients in the government hospitals and as the same is in the larger public interest, this Court may not exercise jurisdiction under Article 226 of the Constitution of India. He further submitted that there is no dispute that all the contracts contain clause of termination by issuing three months advance notice. Even according to the petitioners, one month notice was given. 11 The interim orders were passed as early as in January 2022 and the petitioners cumulatively had more than three months time.
12. Heard Mr. E. Madan Mohan Rao, learned senior counsel, Mr. S. Rahul Reddy and Mr. A. Santosh Kumar, learned Special Government Pleader for the respondents.
13. The writ petitions and other relevant details of the contract of the petitioners are hereunder:
S.No. Writ Petition Petitioner Respondent Contract Contract /Hospital Entry Expiry 1 WPNo.20391 M/s. Sahasra Gandhi Hospital, 21.01.2022 21.01.2024 /2022 Secunderabad Respondent No.4 2 WPNo.21260 M.A. Jaleel Community 14.10.2020 14.10.2022 /2022 Health Centre, Khanapur, Nirmal Respondent No.5 3 WPNo.21340 Md. Shakeer District 21.01.2022 20.01.2024 /2022 Headquarters, Hospital Respondent No.4 4 WPNo.22531 Y Koteswara MGM Hospital, 17.11.2021 17.11.2023 /2022 Rao Warangal Respondent No.4 5 WPNo.22559 M/s District /2022 Sangameshwa Headquarters 15.11.2020 14.11.2022 ra Youth Hospital, Association Kamareddy Respondent No.5 6 WPNo.22793 M/s District /2022 Sangameshwa Headquarters 01.04.2021 31.03.2023 ra Hsopital, Youth Bodhan Association Respondent No.5 7 WP No.23424 Y Srinivas Rajiv Gandhi No /2022 Institute of Subsisting Medical Sciences, Contract General Hospital, Adilabad Respondent No.5 12 8 WP No.23428 Y Srinivas Government 01.04.2022 31.03.2022 /2022 General Hospital, Jagitial (as per (as Per Respondent affidavit) affidavit) No.5 9 WP No.23550 Manikanta Community 09.06.2021 31.03.2023 /2022 Enterprises Health centre, Marpally, Vikarabad (Not a Party)
10. WRIT PETITION - 21410 OF 2022 S.No. Petitioner Respondent/Hospital Contract Contract Entry Expiry
1. KR Vijay Kumar The District Hospital, 12.02.2022 12.02.2024 Karimnagar Respondent No.12
2. Mohd Abdul Jaleel The Area Hospital, 01.10.2021 01.10.2023 Zaheerabad Respondent No.13 The MCH 01.10.2021 01.10.2023 (Withdrawn vide Hospital, Order dated Sangareddy 05.07.2022) Respondent No.14 The Area Hospital, 01.10.2021 01.10.2023 Narayankhed Respondent No.15 Community Health 01.10.2021 01.10.2023 Centre Sadasivapet Respondent No.16 Area Hospital, 01.10.2021 01.10.2023 Patancheru Respondent No.17 21.10.2021 21.10.2023 The District Hospital, Sangareddy Respondent No.18
3. Cherala Srinivas The Govt. Maternity 15.03.2021 15.03.2023 Hospital, Hanmakonda Respondent No.19 17.03.2022 17.03.2024 The Govt CD & TB Hospital, Hanmakonda Respondent No.20 18.09.2021 18.09.2023 The CKM- Govt Maternity Hospital, Matwada 13 Respondent No.21 18.09.2021 18.09.2023 and The Govt Maternity Hospital, 01.09.2021 01.09.2023 Ursu The District Hospital, Sircilla 01.03.2021 01.03.2023 Respondent No.22 For JSSK Diet For General Diet
3. MoluguRajamani The Area Hospital, 07.04.2022 07.04.2024 Nampally Respondent No.23 The ENT 13.04.2022 13.04.2024 Hospital, Koti Respondent No.24
4. Surendar Rao The Kalvakurthy 01.08.2021 01.08.2023 Hospital Respondent No.25 01.08.2021 01.08.2023 The District Hospital Nagarkurnool Respondent No.26
5. Koya Yadava The Niloufer Hospital 07.07.2020 07.07.2024 Reddy Hyderabad Respondent No.27 The Sarojini Devi Eye Hospital 01.10.2020 01.10.2022 Hyderabad Respondent No.28 The Area Hospital 01.04.2021 01.04.2023 Vanasthalipuram Respondent No.29
6. Mahankali The Area 01.10.2021 01.10.2023 Viswanatham Hospital, Jogipet Respondent No.30
14. Be noted that it is the policy decision of the Government to improve the existing diet by providing nutritious diet to the inpatients and duty doctors of all Government hospitals and all health centres. A committee is said to have been constituted to 14 recommend measures for improvement of diet and for enhancement of diet charges. As contained in G.O.Ms.No.34 dated 21.03.2022, the committee made recommendations to improve the diet and also enhance the diet charges. The issue before this Court is whether the petitioners can be permitted to continue to supply diet to the respective hospitals until expiration of their contract period and with enhanced rates.
15. Learned counsels appearing for the petitioners pleaded that new diet would be supplied by the petitioners as well subject to paying them enhanced rates. That the petitioners were selected in a tender process and the action of the respondents would be in violation of Articles 14 and 21 of the Constitution of India.
16. This Court in exercise of jurisdiction under Article 226 of the Constitution of India cannot enforce contractual obligations. All the contracts uniformly contain clause of termination by issuing three months notice under Article 10 of the tender document. None of the petitioners contended that the said clause is arbitrary and none of the petitioners have challenged the said clause. The contention of the learned counsel for the petitioners is that only one month notice is issued. Though the petitioners might face some hardship, as they had legitimate expectation that their contract would continue till the end of the contract period as agreed upon, 15 the larger public interest that would be sub-served in providing nutritious diet to the inpatients and duty doctors cannot be brushed aside. It is settled law that individual interest shall yield to public interest. As the Government has taken conscious decision not to continue the petitioners on enhanced rates and invoked termination clause, this Court is not inclined to interfere with the decision of the Government in that regard.
17. In paras 34 and 35 of the decision of the Supreme Court in SHRILEKHA VIDYARTHI's case (1 supra), it was held as under:
"34. In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government Counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointees, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must be struck down. However, we have referred to certain provisions relating to initial appointment, termination or renewal of tenure to indicate that the action is controlled at least by settled guide- lines, followed by the State of U.P., for a long time. This too is relevant for deciding the question of arbitrariness alleged in the present case.16
35. It is now too well-settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind."
18. In paras 62 and 65 of the decision of the Supreme Court in YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMENT AUHTORITY's case (supra), it was held as under:
"62. It could thus be seen that it is more than settled that a change in policy by the Government can have an overriding effect over private treaties between the Government and a private party, if the same was in the general public interest. The additional requirement is that such change in policy is requirement is that such change in policy is required to be guided by reason.
63. Insofar as the reliance placed by the respondents on the judgment of this Court in the case of ITC Limited (supra) is concerned, in our considered view, the said judgment would not be of any assistance to the case of the respondents. This Court in the said case in paragraph 107.1 has clearly observed that in the case of conflict between public interest and personal interest, public interest should prevail.
64. A number of judgments of this Court have been cited at the Bar by the respondents in support of the proposition that in view of concluded contracts, it was not permissible 17 for the appellants to unilaterally increase the premium by farming a policy.
65. We have hereinabove elaborately discussed that when a policy is changed by the State, which is in the general public interest, such policy would prevail over the individual rights/interests. In that view of the matter, we do not find it necessary to refer to the said judgments. The policy of the State Government as reflected in the said G.O. was not only in the larger public interest but also in the interest of the respondents."
19. The learned Special Government Pleader filed documents along with the counter showing details of new menu/diet being supplied to the inpatients and duty doctors. The menu covers breakfast, lunch, tea time and dinner and provides for a balanced diet which includes protein diets, eggs, fruits, milk, vegetable curry etc. The improvement in diet as compared to the diet supplied by the petitioners is not disputed by the petitioners. The contention of the respondents that 11 (DME) and 136 (TVVP) hospitals have already started supplying new diet to the inpatients and doctors is also not rebutted. That being so, in the opinion of this Court the patients and doctors of the respondent hospitals herein cannot be deprived of a better and improved diet. It would be in larger public interest to have a uniform diet in all the hospitals.
20. In G.O.Ms.No.325 dated 01.11.2011 comprehensive guidelines were issued by the Government for streamlining the 18 management system to provide diet to the inpatients and duty doctors. Having felt the need to introduce a new diet, the Government issued G.O.Ms.No.34 dated 21.03.2022 based on the report of an expert committee, which recommended enhancement of existing diet rates and to provide quality diet to various categories of inpatients and duty doctors. It is clearly mentioned in Para 4 of G.O.Ms.No.34 dated 21.03.2022 that the remaining conditions/guidelines issued under G.O.Ms.No.325 dated 01.11.2011 shall continue. In furtherance of G.O.Ms.No.34 dated 21.03.2022, wherein decision was taken to provide new diet with enhanced rates, the respondents took a decision to cancel the existing contracts, which were issued for supplying diet specified under G.O.Ms.No.325 dated 01.11.2011. Thus, the contention of Mr. S. Rahul Reddy, learned counsel, that G.O.Ms.No.325 dated 01.11.2011 is violated or diluted and that the action of the respondents is in contravention of Section 23 of the Contract Act is unsustainable.
21. The judgment of the Supreme Court in SHRILEKHA VIDYARTHI's case (1 supra) case cannot be applied to the facts of the present case. The decision of the State of Uttar Pradesh terminating the appointments of Government Counsel by a general order was subject matter before the Supreme Court. While considering the statutory status of Public Prosecutors 19 appointed under Section 24 of the Criminal Procedure Code, 1983 and the provisions of the Legal Remembrancer Manual 1975 wherein the power is vested with the Government to appoint Government counsel, the Supreme Court held that the impugned action of the State is ex facie arbitrary. The Supreme Court in para 36 held that "The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case". In para 46, the Supreme Court observed that the Government has terminated all appointments of Government counsel in the districts of the State of Uttar Pradesh by an omnibus order, even though these appointments were individual and that the prescribed procedure laid down in L.R. Manual, which has to regulate exercise of power was totally ignored. Further, in the instant case, no malafides are attributed and as noted above, it is the policy decision of the Government to introduce new diet. In view of the above discussion, more particularly, as there is change in Government policy, which undoubtedly would subserve larger public interest, there is no merit in the contention of the petitioners that the action of the suffers from vice of arbitrariness warranting interference under Article 14 of the Constitution of India. On the other hand, the law laid down by the Supreme Court in YAMUNA EXPRESSWAY 20 INDUSTRIAL DEVELOPMENT AUHTORITY's case (supra) is squarely applicable to the facts of the case.
22. As rightly contended by Mr. A. Santosh Kumar, learned Special Government Pleader, Article 9 of the tender document dealing with termination of contract for default is independent of Article 10 wherein termination of contract may be made by issuing three months notice by either of the parties to the contract. However, as seen from the record the petitioners were admittedly given one month notice and the stay period continued for more than two months. Cumulatively, the petitioners had more than three months time. Thus, in the opinion of this Court, granting further two months time would not be necessary.
In view of the above observations, this Court does not find any merit in the writ petitions and they are accordingly dismissed. The miscellaneous petitions pending, if any, shall stand closed. There shall be no order as to costs.
____________________ B. VIJAYSEN REDDY, J August 1, 2022 DSK