Ecil Rapiscan Ltd. vs Union Of India (Uoi) And Anr.
2002 Latest Caselaw 1724 Del

JUDGMENT

S.B. Sinha, C.J.

1. These two writ petitions involving common questions of law and fact were taken up for hearing together and are being disposed of by this common judgment.

2. For supply of 39 colour X-Ray Baggage Inspection Systems, a tender was floated by the second respondent herein; pursuant to or in furtherance whereof the petitioners herein submitted their offers. Technical bids were opened on 22nd March 2000 whereas commercial bids in relation to the said tender were opened on 23rd October 2000.

3. The petitioner in CWP No. 2944/2001 ECIL Rapiscan Ltd. by a letter dated 30th October 2000 addressed to the second respondent alleged that having regard to the violation of the mandatory terms of M/s Heimann Systems INC, Canada (hereinafter called 'the Canadian company' for short) and Beijing Zhongdun Security Technology Development Co. (hereinafter called 'the Chinese Company' for short), their bids are liable to be cancelled as being disqualified without notice.

4. The petitioner in CW No. 2487/2001 Beijing Zhongdun Security Technology Development Co. made correspondence with the second respondent for awarding contract which was recommended by the Additional Secretary of the Department of Atomic Energy. However, on or about 15th February 2001, the official respondents called for a fresh bid. Being aggrieved thereby and dissatisfied therewith, the Chinese company filed a writ petition in this court which was marked as CW 1356/2001. In the said writ petition, a contention was raised on behalf of the official respondents that no decision having been taken in relation thereto, the said writ petition was premature. A statement was also made to the effect that the tender shall be awarded in accordance with law and in that view of the matter by an order dated 26th March 2001, the said writ petition was dismissed in liming. On or about 23rd April 2001, the second respondent, Chairman, Airports Authority of India, however, accepted the bid of the third respondent which is a Canadian company.

5. The contention raised by the Chinese company is that is offer had been rejected only purported to be in terms of Clause 8 of the Tender Conditions which is as follows:

"8. The acceptance of a tender, will rest with the Chairman, Airports Authority of India who does not bind himself to accept the lowest tender and reserves to himself the authority to reject any or all the tenders received without the assignment of any reason. All the tenders is which any of the prescribed conditions are not fulfillled or are incomplete in any respect are liable to be rejected."

6. It is further accepted that prior to passing of the said order, no opportunity of hearing was given despite the fact that such an undertaking had been given by the official respondents herein in the earlier writ petition.

7. It stands admitted that the tender of the Chinese company was not considered purported to be on the ground of the alleged security risk. The tender of the third respondent had been accepted purported to be on the ground that it was the lowest tenderer.

8. The learned counsel appearing on behalf of the petitioner would contend that the entire decision-making process was tainted with male fide and arbitrary action. The decision of the respondents was neither informed by reasons nor in arriving at decision-making process, fair and equitable procedure had been adopted. It has been contended that the third respondent admittedly did not fulfilll and mandatory provision of the contract inasmuch as in terms thereof, price of the AMC was required to be more than 8% and despite the knowledge thereof, a circuitous method of re-bidding had been taken recourse to pursuant to and in furtherance whereof the respondent No. 3 pushed up its bid above 8%.

9. Mr. V.P. Singh, the learned senior counsel appearing on behalf of the respondent accepted that no hearing had been given to the Chinese company. According to the learned counsel, acceptance of tender of one country by another country depends upon reciprocity in such matter, by the concerned countries and it was expected that the offer made by an Indian company shall not be accepted in China, and, thus, its offer had not been accepted. The learned counsel would contend that the decision to ask for a fresh bid became necessary as only three parties filed their bids and certain lacunae therein had been found out. The learned counsel would contend that although the offer of the annual maintenance cost made by the third respondent was below 8% but as it was required to import the requisite machinery, upon addition of the excise duty and other costs, the total come to 10.7%. It was further contended that ECIL Rapiscan Ltd. upon withdrawal of the earlier writ petition participated in the tender process without any demur whatsoever and despite the fact that earlier it was the lowest tenderer and upon re-bidding the third respondent became the lowest tender, the same had been accepted. The learned counsel would, therefore, contend that the action of the petitioner herein is barred under the rule of estoppel.

10. It has been stated, however, that all the machinery has since been supplied and accepted.

11. It is a matter of great concern that the first and second respondents herein deal with such global tenders in such a slipshod manner.

12. Before adverting to the questions involved in these writ petition, we may notice that the Apex Court in W.B. State Electricity Board v. Patel Engineering Co. Ltd. and Ors., (2001) 2 SCC 451, in no uncertain terms stated that in a case where global tenders are invited, it is obligatory on the part of the tenders to scrupulously follow the conditions of a tender. In that case, even a computer mistake was not considered to be sufficient to allow the respondent therein to make clarifications.

13. In the instant case, in the notice inviting tender, it was categorically stated:

"8. The acceptance of a tender, will rest with the Chairman, Airports Authority of India who does not bind himself to accept the lowest tender and reserves to himself the authority to reject any or all the tenders received without the assignment of any reason. All the tenders in which any of the prescribed conditions are not fulfillled or are incomplete in any respect are liable to be rejected."

(Emphasis supplied)

14. One of the special conditions of tender deals with assessment of an indigenous manufacturer which is in the following terms:

"3.28 Association with an indigenous manufacturer

3.28.1 It is essential on the part of the contractor to have an association with an indigenous manufacturer / reputed contractor experienced in the field of X-Ray Baggage Inspection System so as to fully associate him right from the time the work is awarded and till completion of guarantee and defects liability period. The firm so selected by he Contractor should be fully involved with the installation work and subsequent operation / maintenance of the installation. The tenderer must intimate the name of such firm at the time of submission of tenders."

15. We may also notice that the Central Vigilance Commission by a Press Release dated 20th November 1998, inter alia, directed:

"The most far reaching direction issued to tackle the monster of corruption and to usher in transparent and effective system in the tendering process is to ban negotiations. The Commission has banned all post tender negotiation with immediate effect except in the case of negotiations with L1 (i.e. lowest tenderer)."

16. It is not in dispute that the respondent No. 3 herein had, in an answer to the first bid, quoted less than 8% for the annual maintenance contract. In terms of the tender conditions, thus, the respondent No. 3 earned disqualification and its bid was liable to be rejected.

17. The quotation of the respondent No. 3 did not include five years' maintenance contract charges which were mandatory and they quoted only for machine installation and commissioning. Maintenance charges had been subject matter of call charges which were contradictory to the notice inviting tender. They merely quoted preventive maintenance at the rate of Rs. 7,500/- per call and service call at the rate of 15,000/- per call but they did not specify the number of calls required. They had also shown cost of spares separately as US$ 2,300.

18. Stipulation in relation to Annual Maintenance Contract is as under:

"ANNUAL MAINTENANCE CONTRACT (AMC)

1. On expiry of warranty & defects liability period, each system supplied by the tenderer for airports shall be maintained on contract basis, for a period of 5 years. The tenderer, hence must offer the rate & amount for each system, airport-wise in Part - III as per the annexure of Schedule of quantity. The AMC charges shall be considered while evaluating the comparative statement of price bids.

2. The tender without comprehensive annual maintenance contract offer in the prescribed form Part - III as per annexure E- 3, (which should not be less than 8% of the cost of the system) shall not be considered & shall be rejected without any further notice to the firm."

Page 69, para 5 serial 2 of the NIT states:

"The tender without comprehensive annual maintenance offer in the prescribed form Part - II as per Annexure E-3, (which should not be less than 8% of the cost of the system) shall not be considered and shall be rejected without any further notice to the firm."

19. The respondent No. 2 in its counter-affidavit filed in the earlier writ petition No. 1356/2001, in relation to respondent No. 3, stated as follows:

"(a) M/s. Heimann Systems Inc. Canada

The quotation is for supply, installation, testing and commissioning as well as for Annual Maintenance Contract (AMC). During scrutiny, it was found that the Heimann Systems, Canada had quoted for five years AMC as per scope of work in the AMC Chapter.

The Annual Maintenance Contract (AMC) consists the following parts:--

A. Preventive Maintenance.

B. Corrective Maintenance.

C. Repair / free replacement of assembly / sub-assembly and cards, switches, parts and consumable items used in the system.

Deviations are recorded as under:-

(i) In their offer towards schedule of quantities, Part - III for AMC, spare parts cost indicated in US dollar instead of India rupee. Though, they had agreed to comply the terms and conditions as submitted in NIT Clause 4.8.1 read with 4.14.4 (iv) that they would bear all the taxes and duties.

(ii) AMC charges quoted are less than 8%.

the petitioner has submitted that the AMC given by the said firm is on call basis, which is not correct. Actually, it is a unit based in the format of schedule of quantity is one for each and not per call..."

In relation to ECIL Rapiscan Ltd., it was stated:

"(b) M/s. ECIL Rapiscan Ltd. New Delhi.

The firm has given two offers, one for indigenous models of machines and second for imported models. The offer for imported models had the following deviations:-

(I) Free on Board (F.O.B) rates for Rapiscan model RAP 520B and RAP 526-A not indicated in the schedule of quantity Part-I. Copy of the Commercial bid of the said firm is enclosed as Annexure - R2.

(c). M/s. Beijing Zhongdun Security Technology Development Company, China :-

(i) Schedule of Quantity Part-I has not been indicated for a complete system i.e. as a unit of XBIS as stipulated in NIT.

(ii) different custom duty structure for different components of the system have been indicated instead of a unit quotation for a complete system as required in the Notice Inviting Tender. But they also accepted all terms and conditions like other tenderers to be complied with.

It is submitted that out of four participants for five offers, two belonged to the petitioner, one each to M/s. Heimann Systems Inc., Canada, M/s. Beijing Zhongdun Security Technology, China and M/s. Perkin Elmer Instruments, Singapore.

However, after scrutiny it was observed that only two bids, viz. that of M/s. ECIL Rapiscan Ltd., New Delhi for indigenous model and other of M/s. Perkin Elmer Instruments, Singapore were in order and the remaining were having minor departure from the NIT conditions. The said deviations were not of such a nature that their entire tender could be rejected or accepted. It is further stated that with three participants having deviations and remaining two could not be considered for the purpose of competition, it was decided to call for rebidding of the commercial bid by the answering respondent."

20. However, in its counter-affidavit filed in the present petition, an improvement in this behalf has been made stating:

"12. That the contents of para No. 12 are

firm has fulfillled all the conditions of the NIT and was technically qualified and only after its becoming L-1. The work was awarded to respondent No. 3. It is submitted that M/s. Heimann System Inc. Canada had quoted the ANNUAL MAINTENANCE CONTRACT cost in their tender which is as per the provisions of Notice Inviting Tender. The said company had given the component of spare parts in US Dollars, which was converted in INR but was not loaded with Customs Duty on spare parts. Hence, the percentage of ANNUAL MAINTENANCE CONTRACT to basic cost was less than 8%. The percentage of ANNUAL MAINTENANCE CONTRACT to basic cost should be more than 8% as per Notice Inviting Tender. It is pertinent to mention here that whenever the spare parts will be brought in the country, the same are liable for customs duty leviable on (cost, insurance, freight value + 1%) and if the said cost is added in INR, the percentage of ANNUAL MAINTENANCE CONTRACT to basic cost comes to 10.17% which is more than 8% and fulfillls the basic Notice Inviting Tender conditions. Therefore, the allegations leveled by the petitioner are baseless and denied. Even if the customs duty is loaded, the offer of M/s. Heimann Systems, Inc. is still lower than the petitioner."

21. It is not in dispute that having regard to the security of the State and particularly the airports in several parts of countries including North East, the supply of X-Ray machines which had to be installed in the Air Force must have a back-up as service and spare parts should be ready and it was in that situation, a stipulation was made that the maintenance charges should not be less than 8% of the contract value. However, upon re-bid, the offer of the respondent No. 3 was pushed up to more than 8% which is contrary to the terms and conditions.

22. The AMC charges were to be in the following terms:

Sl.

No.

Brief description Qty Unit 1st Year

2nd Year

3rd year 4th Year 5th Year

as per enclosed Annexure E:

-3     Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount

  Preven live Maintenance

for each

INR 7500,00

INR

292500.00

INR

7500,00

INR 292500.00

[NR 7500.00

INR 292500.00.

INR 7500,00 -

INR

292500.00

INR 7500,00

INR 292500

  Service Calls

for each

INR

15000.00

INR 585000,00

INR 15000.00

INR 585000.00

INR 15000.00

INR 585000.00

INR 15000.00

INR

585000.00

INR

15000.00

INR 585000

  Spare Parts

for each

USD 2300.00

USD 89700,00

USD

USD

91650

USD

USD 93600

USD

USD 97500

USD

USD 99450

23. The third respondent, however, gave its offer, which was less than 8% of bid's offer.

24. Despite the fact that the tender of the third respondent was to be rejected summarily, on 15th February 2000, the respondent issued the following letter:

"Sub: SITC of colour XBIS at various Airports in India - Fresh, unconditional, Commercial Bid.

Dear Sir,

Reference is invited to your Technical & Commercial Bid No. 90A/ER/S&M/NAD/NT dated 17-03-2000 against global NIT by this organization for supply of 39 Nos. XBIS.

It has been decided to re-invite the Commercial bid from the selected technically qualified tenders whose commercial bids were open on 23.10.2000.

You are requested to submit your fresh commercial bid exactly in the format of schedule of quantity of NIT. The Commercial Bid must be received in the officer of General Manager (EQ), Airports Authority of India, Rajiv Gandhi Bhawan, Safdarjung Airport, New Delhi - 110003 by 1430 hrs on 02.03.2001 and shall be opened on 1500 hrs. on same date in the present of tenderers.

The fresh, unconditional commercial bid must indicate complete details, failing which your bid shall be rejected summarily without assigning any reasons. For comparison purpose the conversion rate of foreign exchange will be taken into account as on date of opening of commercial bid i.e. 02.03.2001. All other terms and conditions of the NIT remain unchanged. Clarification with reference to guidelines to complete the schedule of quantities is enclosed."

In the enclosure made therewith, it was stated: "(i) AMC charges will be considered for comparison of rates along with cost of equipment. As per Clause 2 of Chapter 5 of NIT, AMC charges should be minimum 8% of the cost of equipment. It is clarified that the cost of equipment shall be considered as F.O.R. site rate in Indian Rupees excluding installation, testing and commissioning charges.

Please note that the AMC contract will be awarded on expiry of warrantee & defect liability period as per original terms of NIT (Clause 5.1).

(ii) All rates quoted for comprehensive maintenance contract charges as per Part - III Schedule of Quantity of NIT (P -- 76) should be quoted in Indian Rupees as lump sum charges for each of the five years separately. This should included service charges and cost of spares. No other charges on any component of AMC will be paid extra by AAI."

25. Thus, the stand taken by the respondents herein clearly is contrary to the terms of the basic tender documents.

26. The submission of Mr. V.P. Singh to the effect that no hearing was required to be given to the Chinese company is contrary to its undertaking given before this court. We fail to comprehend that when a global tender is called, having regard to the liberalisation in economic policy adopted by the Government of India, how the second respondent can refuse to consider a valid tender made by an international company only on the ground that it is based in China.

27. We may place on record that when we called upon Mr. V.P. Singh to elaborate on his argument that grant of an offer made to a foreign company despite global tender having been invited, depends upon reciprocity, he utterly failed to do so. The ipse dixit of the second respondent to the effect that in a similar situation, the Peoples Republic of China, may not accept the tender offered by an Indian company, is based on a pure surmise and conjecture. Such a contention betrays ignorance of the international treaties including GATT.

28. It is also not in dispute that ECIL is a public sector undertaking. It had all along been supplying such X-Ray machines to the Airports Authority of India. If its tender was valid and could not have been rejected, why a re-bid was necessary, is beyond any comprehension. The fact that its tender was lowest, was a matter which requires serious consideration. We hasten to add that by making the afore-mentioned observation, we do not mean to say that the lowest tenderer has right to be offered the contract but it is beyond any cavil of doubt that the State in the matter of distribution of a largesse or grant of a contract, must act in a fairly, impartial and indiscriminate manner.

29. Article 14 of the Constitution of India can be invoked by every person irrespective of the fact as to whether he is a citizen of India or not. The equality clause being applicable to all the persons in the world irrespective of their domicile, there cannot be any doubt whatsoever that the act on the part of the second respondent is wholly without jurisdiction.

30. Submission of Mr. Singh to the effect that ECIl's action is barred by rule of estoppel is also stated to be rejected. It has earlier withdrawn its writ petition on the specific stand taken by the second respondent. The second respondent is guilty of breach thereof in the present writ petition. Having regard to the fact that the petitioner had taken part in the tender process without prejudice to his rights and contentions, there cannot be may doubt whatsoever that the rule of estoppel will have no application in the instant case.

31. The second respondent not only failed to consider the terms of the offer to the effect that the special conditions as regards association with an indigenous manufacturer, as noticed hereinbefore, had also followed the guidelines issued by the Central Vigilance Commission. Before us an attempt has been made by Mr. Sistani, the learned counsel for the petitioner that his client had been supplying such X-Ray machines, and Annexure A to the writ petition clearly shows that it had been carrying out its business with as much as 35 reputed companies including Airports Authority of India, International Division and Airports Authority of India, National Division, Air Headquarters, Air India, Jammu and Kashmir Police, Delhi Police, Indian Airlines, United Airlines, Jet Airways, Videsh Sanchar Nigam Limited, etc. However, in our opinion, this court in exercise of its jurisdiction under Article 226 of the Constitution of India cannot go into such a question.

32. This aspect of the matter has recently been decided in LPA No. 204/2002 Backbone Tarmat - NG JV v. National Highways Authority of India and Anr., decided on 18th May 2002 wherein it has been held:

"In Ramana Dayaram Shetty v.

International Airport Authority of India and Others , law is stated in the following terms:

"The test of eligibility laid down was an objective test and not a subjective one. What the condition of eligibility required was that the person submitting a tender must have 5 years' experience of running a IInd Class hotel as this would ensure by an objective test that he was capable of running a IInd class restaurant and it should not be left to respondent 1 to decide in its subjective discretion that the person tendering was capable of running such a restaurant. If, therefore,e a person submitting a tender did not have at least 5 years' experience of running a IInd Class hotel, he was not eligible to submit the tender and it would not avail him to say that though he did not satisfy this condition, he was otherwise capable of running a IInd Class restaurant and should, therefore, be considered."

It was further observed:

"Now, there can be no doubt that what paragraph (1) of the notice prescribed was a condition of eligibility which was required to be satisfied by every person submitting a tender. The condition of eligibility was that the person submitting a tender must be conducting or running a registered IInd Class hotel or restaurant and he must have at least 5 years' experience as such and if he did not satisfy this condition of eligibility, his tender would not be eligible for consideration. This was the standard or norm of eligibility laid down by respondent 1 and since the respondents 4 did not satisfy this standard or norm, it was not competent to respondent 1 to entertain the tender of respondents 4. It is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. Thus rule was enunciated by Mr. Justice Frankfurter in Viterali v. Saton reported in 359 U.S. Law Ed (Second series) 1012, where the learned Judge said:

An executive agency must be rigorously held to the standards by which it professes its action to be judged... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed... This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with the sword."

In Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. , it was observed:

25. 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 counterproductive.

26. 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 supports, the respondents relied upon Ramana Dayaram Shetty v.

International Airport Authority of India. In that case, the Court had held judicial review as a check on the exercise of arbitrary powers by the State and as a check on its power to grant largess. The Court also observed that when the exercise of discretion is structured in terms of the tenders which have been invited, the discretion must be exercised in accordance with the norms so laid down. The same view has been taken by this Court in Premium Granites v. State of T.N. where this Court observed that where rational non- discriminatory norms have been laid down for granting of tenders, a departure from such norms can only be made on valid principles. These principles enunciated by this Court are unexceptional.

In Tata Cellular v. Union of India, the law is stated in the following terms:

"(1) The modern trend points to judicial restraint in administrative action.

(2) The court does not it 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.

(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. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often then not such decisions are made qualitatively by experts.

(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 sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle or reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by malafides.

(6) quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure"

However, the Apex court itself opined while considering the case in West Bengal Electricity Board (supra)

"In the instant case, we have also noted the mistakes in the bid documents of respondents 1 to 4, even through caused on account of faulty functioning of computer, could have been discovered and notified by the said respondents with exercise of ordinary care and diligence. Here, the mistakes remained in the documents due to gross negligence in not checking the same before the submission of bid. Further clauses 24 and 27 of the ITR permit modification or withdrawal of bids after bid submission but before the deadline for submissions of the bids and not thereafter. And equity follows the law. Having submitted the bid they did not promptly act in discovering the errors and informing the same to the appellant. Though letters were written on 25.10.1999 and 17.12.1999 yet the real nature of errors/mistakes and corrections sought were not pointed out till 23.12.1999 when representation was made after interim direction of the High Court was given on 21.12.1999. Indeed it appears to us that they improved their claim in the representation. In our view the aid respondents are not entitled to rectification of mistakes/error for being considered along with the other bidders."

The said Question has also been considered by the Monarch Infrastructure (P) Ltd v. Commissioner Ulhasnagar Municipal Corporation and Ors. :

"There have been several decisions rendered by this Court on the question of tender process the award of contract and have evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike We may sum up the legal position thus:

(i) The Government is fee to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest.

(ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate.

(iii) It is open to the government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and goods reasons".

Yet again in Sterling Computers Limited v. M&N Publications Limited and Anr. it has been held:

"That is why the courts have impressed that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But the even in such matters they have to follow the norms recognised by courts while dealing with public property. It is not possible for courts to question and adjudicate every decision taken by an authority, because many of the Government undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts such decisions are upheld on the principle laid down by Justice Holmes that court while judging the constitutional validity of executive decisions must grant certain measure of freedom of paly in the joints to the executive.

But in normal course some rules must exist to regulate the selection of persons for awarding contracts. In such matters always a defense cannot be entertained that contract has been awarded without observing the well settled norm and rules prescribed on basis of the doctrine of executive necessity. The norms and procedures prescribed by ?Government and indicated by courts have to be more strictly followed while awarding contracts which have along with a commercial element a public purpose as in the present case the publication of directories by the MTNL is not just a commercial venture; the primary object is to provide service to the people.

The action or the procedure adopted by the authorities which can be held to be State within the meaning of Article 12 of the constitution, while awarding contracts in respect of properties belonging to the State can be judged and tested in the light of Article 14 of the constitution is settled by the judgment of the Court in the case of Ramana Dayaram Shetty v. International Airport Authority of India; Kasturi lal Lakshmi Reddy v. State of J&K, Fertilizer Corporation Kamagar union (Regd) Sindri v. Union of India Ram and Shyam Co. v. State of Haryana, Haji TM Hassan Rawthar v. Kerala Financial Corporation, Mahabir Auto Stores v. Indian Oil Corpn and Shrilekha Vidyarthi v. State of U.P. It has been said by this court in Kasturi Lal:

"It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State such an action would be both unreasonable and contrary to public interest. The Govt therefore cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course thee are other considerations which render it reasonable and in public interest do so."

In Air India Ltd. v. Cochin International Airport Ltd and Ors. , it was held:

"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 through 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 malafides, unreason ness 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 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."

(Emphasis supplied)

33. The question which now arises is as to whether having regard to the fact that all the machines have been supplied, would it be proper for this court to cancel the contract? The answer to the said question may be rendered in negative. The writ court in a given situation may not exercise its jurisdiction only because it may be lawful to do so. Although the action of the second respondent herein is tainted with a legal malice and gross unfairness, having regard to the fact that offer mae by the second respondent in favor of third respondent has already been acted upon, we are of the opinion that the interest of justice would be sub-served if the second respondent is directed to pay heavy costs to the writ petitioners herein which are quantified at Rs. 5 lakhs each.

34. We, however, make it clear that despite the afore- mentioned direction, it would be open to the petitioners herein to sue the respondent No. 2 for damages before an appropriate court.

35. We may further observe that it is a fit case wherein the appropriate authority may hold an enquiry as regard conduct of the concerned officers and in the event it is found that in the matter of grant of a contract to the respondent No. 3, some officers are responsible personally, appropriate action against them must be taken.

36. With the afore-mentioned observations and directions, this writ petition is disposed of.