G. Kannan vs Corporation of Madras and Another

Veeraswami, J.—The Petitioner, who is a councilor of the Corporation of Madras, asks for a rule to forbid the Respondents, the

Corporation of Madras and its Commissioner, from giving effect to a contract which the Commissioner had entered into with Messrs. Khivraj

Motors Private Limited. The rule is asked for on the ground-that the contract to purchase 45 Bedford chassis for the purpose of municipal

conservancy was contrary to the policy which the Council of the Corporation had laid down by its resolution, dated August, 11, 1961 and was,

therefore, contrary to Section 24 of the Madras City Municipal Corporation Act, 1919. The question will turn upon the effect of that resolution

and of a later resolution of the Council and of the relative statutory provisions as amended in 1961.

On September 23, 1958 the Commissioner made certain proposals which the Council accepted on March 10, 1959, the effect of which was

that the Corporation should go in only for three standard makes of motor vehicles for its use. This policy was adopted on grounds of economy,

easy maintenance, repairs and replacement of parts. On a further note, dated June 29, 1961 of the Commissioner, the Council resolved on August

11, 1961 further clarifying the policy for the purchase of motor lorry chassis for conservancy purposes. The resolution was that purchase of chassis

for conservancy purposes should be confined to Fargo petrol chassis, if petrol vehicles were desired, and to Leyland Comet chassis or Tata

Mercedes Benz chassis or Fargo diesel chassis in case diesel vehicles were required. The Government of India intimated the Corporation of

Madras sometime in July 1963 that it would not be possible to release more Tata Mercedes Benz vehicles in its favour and that it, therefore, would

be well advised to go in for Dodge or Bedford petrol or diesel vehicles, which, it was said, were easily available in the market. Apparently in view

of this and the recommendation of the Central Committee, dated July 9, 1963 the Council resolved on February 5, 1964 that any chassis available

in the market might be purchased. But this should be done either by calling for quotation or by inviting tenders. The second Respondent-

Commissioner, made two proposals, one on November 15, 1962 for the purchase of three Fargo chassis and the other on August 20, 1963, for

the purchase of 40 lorry chassis including body building cost involving an expenditure of Rs. 14,50,000. The latter proposal also recommended the

purchase of ten numbers of tri-wheeler conservancy unit and mechanical road sweeper. With this we are not concerned in this petition. The second

proposal was considered by the Contracts Committee and by its proceeding, dated August 26, 1963 it was of the view that Bedford was also an

equally serviceable vehicle like the Fargo for certain reasons, and in view of the advantages and of the lower price of the Bedford the lowest tender

of Khivraj should be accepted. The proceedings would suggest that the second Respondent had earlier asked for tenders, and one of them came

from Khivraj. On August 30, 1963 the Commissioner accepted the tender of Khivraj and on the next day took delivery of 45 Bedford chassis on

payment of Rs. 2,00,000 as part payment to Khivraj. On February 5, 1964 the second Respondent prepared a note for the Council in which he

referred to the contract with Khivraj Motors Private Limited for supply of forty-live numbers 167 W.B. Diesel Truck chassis and apprised the

Council of the fact that the balance due to the company was demanded by the company by a lawyer''s notice threatening to institute a suit for

recovery of the same. The Commissioner in the circumstances wanted the Council to divert a sum of Rs. 6,78,828 temporarily, being the unspent

balances of the loans sanctioned by the Government in 1962-63 and 1963-64 for payment to Khivraj. It may be mentioned that the Commissioner

had earlier asked for sanction of the Council for a supplemental grant of Rs. 16,00,000 for the purpose of purchasing forty numbers Truck Chassis

including the body building and the other vehicle and machinery referred to in the Commissioner''s note, dated August 20, 1963. The Council at its

meeting, dated February 5, 1964 considered the communication of the Commissioner, dated February 5, 1964, which was intended for the

information of the Council and made the supplemental grant of Rs. 16,00,000 already applied for. On the proposal of the Commissioner, dated

November 15, 1962 for the purchase of Fargo chassis, the Central Committee resolved on July 9, 1963 approving the proposal. At the same time

the Central Committee resolved:

...that in supersession of all the previous resolutions in the matter of purchase of chassis required for the use of the Corporation, any chassis

available in the market may be purchased. All such purchase should be made either by calling for quotations or by inviting tenders.

Both the Commissioner''s note and the resolution of the Central Committee were placed before the Council at its meeting on February 5, 1964,

on which date the Council resolved to approve of the resolution of the Central Committee. It is clear, therefore, that the Council reversed its earlier

policy in the matter of purchase of particular types of motor chassis and left it open for purchase of any chassis available in the market either by

calling for quotation or by inviting tenders.

On this background of facts the contention of Sri Mohan Kumaramangalam for the Petitioner is that as between August 11, 1961 and February

2, 1964 the earlier policy of the Corporation was in force and was binding u/s 24 on the Committee constituted under the Act and the

Commissioner, the contract entered into with Khivraj on August 30, 1963 for the purchase of 45 Bedford Chassis contrary to that policy is in

excess of his powers, illegal and invalid. Learned Counsel states that the resolution of the Council, dated February 5, 1964 reversing the earlier

policy has no retrospective effect so as to validate the contract of purchase. This argument is met by Sri Chengalvaroyan for the Respondent, on

the ground that as a result of the Madras Amending Act LVI of 1961 the power to approve of a tender was with the Contracts Committee and

that the earlier policy of the Council could no longer prevail over the decision of the Contracts Committee, and that since the Contract Committee

had approved of the tender submitted by Khivraj, the second Respondent was justified in making a contract with that company and taking delivery

of the chassis pursuant to that contract.

In order to appreciate the rival contentions it is necessary to notice the relevant statutory provisions, both before and after the said Amending

Act was passed. Section 23 defines the functions of the Council, which includes that the Municipal Government of the City shall vest in it but

subject to the provisions of the Act. This provision places a limitation upon the Council, namely that it shall not be entitled to exercise functions

assigned by or under the Act or any other law to a standing committee or the Commissioner. By the Amending Act the words standing committee

have been substituted by committees constituted under the Act. Section 23 also enacts without prejudice, of course, to the general provision that

the municipal Government is vested in the Council, that it shall be the duty of the Council to consider all periodical statements of receipts and

disbursements and all progress reports and pass such resolutions thereon as it thought fit. Section 24 laid down an obligation on the Standing

Committee, and after the amendment, on all the committees constituted under the Act and the Commissioner, to give effect to every resolution of

the Council, unless of course the resolution was cancelled in whole or in part by the State Government. Sections 6-A and 6-D, a introduced by the

Amending Act, brought into being a Central Committee and a Contracts Committee. They also indicated the composition of each committee.

Section 80(1), which remains unamended, contains general provisions ""regarding contracts and Sub-section (1) of the section states that the

Council may enter into and perform all such contracts as it may consider necessary or expedient for carrying into effect the provisions of the Act.

Clause (c) of Sub-section (2) of Section 80 put a restraint upon the power of the Commissioner to enter into a contract involving an expenditure

exceeding ten thousand rupees and not exceeding fifty thousand rupees without the sanction of the Standing Committee. Clause (d) of Sub-section

(2) ran:

No contract involving an expenditure exceeding fifty thousand rupees shall be made by the Commissioner unless it has been sanctioned by the

Council.

By the Amending Act Clauses (c) and (d) were dropped and certain consequential amendments were made to Section 82, which relates to

invitation of tenders. Sub-section (2) of Section 82 as amended, gave power to the Commissioner to enter into a contract subject to Sub-section

(1) of Section 80, if its value did not exceed Rs. 25,000. Sub-section (3) of this section, which is new, reads.

Where the amount of any contract exceeds twenty-five thousand rupees, the Commissioner, on receipt of the tenders in respect of such contract

made in pursuance of the notice given under Sub-section (1), shall place the tenders before the contracts committee, which may approve any

tender which appears to it, upon a view of all the circumstances, to be the most advantageous, and thereupon the Commissioner shall, subject to

the provisions of Section 80 accept the tender so approved.

What this Sub-section contemplates is that the Commissioner may invite tenders in exercise of his power under Sub-section (1) of Section 82,

which involved an expenditure exceeding twenty-five thousand rupees and place tenders before the Contracts Committee is invested with the

power to approve the tenders, if they appear to the Committee to be most advantageous. After the approval by the Contracts Committee, the

Commissioner shall accept the tenders. But he should do so subject to the provisions of Section 80.

Sri Chengalvaroyan''s argument is that where as under old Clause (d) of Sub-section (2) of Section 80, the power to sanction contracts

exceeding the value of fifty-thousand rupees was with the Council, after the Amending Act such power stands transferred to the Contracts

Committee. Learned Counsel infers from this premise that any policy laid down by the Council prior to April 14, 1962, when the Amending Act

came into force, would cease to be binding on the Contracts Committee. He urges, therefore, that the Contracts Committee, was free to lay down

its own policies in the matter of tenders and when it reversed the policy of the Council formulated in 1961 and approved on August 26, 1963, the

Commissioner''s contract with Khivraj, which it was entitled to, under Sub-section (3) of Section 82, the Commissioner was bound to accept the

tender submitted by Khivraj, and give effect to it. It is, therefore, said that the Commissioner being under a duty to accept the tender approved by

the Contracts Committee no rule of mandamus could go out forbidding him from doing a duty which Sub-section (2) of Section 82 has laid on him.

In my opinion this argument is not correct and proceeds on an incorrect understanding of the true effect of the amended provisions.

The Municipal Government of the city is by Section 23 vested in the Council. The power to enter into contracts is also vested in the Council by

Sub-section (1) of Section 80. In addition to these general and specific powers in relation to contracts, the council is also charged by Section

23(3) with the duty to consider all periodical statements of receipts and disbursements and all progress reports and pass resolutions thereon as it

thought fit. The Council also still remains the authority to sanction funds required for expenditure. Sub-section (3) of Section 82 cannot be read as

qualifying these general powers of the Council except to the extent specific functions have been expressly assigned to this or that committee. That is

what Sub-section (1) of Section 23 states. The specific function assigned to the Contracts Committee in Sub-section (3) of Section 82 is merely to

consider and approve the tender, which in its opinion is most advantageous. The power of the Contracts Committee is not to enter into contracts

but is confined to a consideration of particular tenders to see which of them would be most advantageous, and give its approval. The only

implication, in my opinion, of Sub-section (3) of Section 82 in relation to the general powers of the Council is that the Council after constitution of

the Contracts Committee can no longer consider particular tenders and give its approval to any of them. Subject to this limitation, the general

power of Government vested in the Council and of entering into contracts is left unaffected. It may be that the contracts committee may follow its

own policy or procedure in the matter of finding out which among the tenders is the most advantageous and for giving its approval. But it does not

necessarily follow from it that Council in exercise of its general powers, both of Government and of entering into contracts, cannot lay down

policies in general in the matter of entering into contracts. Entering into contracts will touch also approval of the tenders. Where such policies are

formulated by resolutions of the Council, Section 24 enjoins upon the Committees and the Commissioner to follow them. This is made further clear

by the concluding words of Sub-section (3) of Section 82. Their effect is that after the Contracts Committee gives its approval to a tender, the

Commissioner shall accept the tender but only subject to the provisions of Section 80. That clearly means that the Commissioner can accept the

tender only subject to the power of the Council to enter into contracts. When, therefore, the Council has evolved a policy by its resolution relating

to entering into contracts on behalf of the Corporation, the Commissioner can accept a tender approved by the Contracts Committee only if it is in

conformity with such policy. He cannot by reason of Section 24 and Sub-section (3) of Section 82 run counter to the policy laid down by the

Council and proceed to accept a tender merely on the basis that it has received the approval of the Contracts Committee. In fact the Contracts

Committee itself, just like any other committee u/s 24, will be bound by the policy of the Council.

On that view it may be seen that; when the Central Committee and the Contracts Committee purported to reverse on July, 1963 and August

26, 1963 respectively, the policy of the Council as laid down in its resolution, dated August 11, 1961, they acted in excess of their powers, for

they were by terms of Section 24 bound by the resolution of the Council. If the matter had stood there, I would have had no hesitation in declaring

the contract entered into by the Commissioner with Khivraj to be illegal and invalid. But on the facts and for the reasons which I shall presently

advert to, I do not think that such a declaration will be called for.

On the facts, as it seems to me, the effect of the Council�s resolution, dated February 5, 1964 is to give its approval to the contract entered

into by the Commissioner with Khivraj. I am unable to accept the argument for the Petitioner that the resolution reversing the earlier policy has only

a prospective effect. From the facts, which I have already set forth, it would appear that on the same day the Council passed two resolutions, one

arising out of the Commission''s note, dated November 15, 1962 and the other in relation to the Commissioner''s note intended for the opinion of

the Council, dated February 5, 1964. The Central Committee, as I mentioned, had resolved on July 9, 1963 itself that the earlier policy should be

reversed and any chassis available in the market might be purchased. This resolution of the Central Committee was read by the Council, and it

accorded its approval to it. The approval, though given only on February 5, 1964, related to resolution of the Central Committee, dated July 9,

1963. Quite apart from that, I am not satisfied that the Council did not know of the specific contract entered into by the Commissioner with

Khivraj when by its Resolution No. 210 of 1964 it sanctioned the expenditure of Rs. 16,00,000 for purchase of motor chassis and other

machinery. The note of the Commissioner, dated February 5, 1964 itself started by stating

An order was placed with Messrs. Khivraj Motors (Private) Limited, Madras for the supply of 45 Nos. 167 W.B. Diesel Truck Chassis

which were required urgently for conservancy purposes.

That clearly meant Bedford Diesel Truck Chassis. In that note, the Commissioner also informed the Council of the urgency for diverting a sum

of Rs. 6,78,828 in part-payment to Khivraj. This note was specifically referred to in the proceedings of the Council resulting in the resolution No.

210 of 1964. Further, even the note of the Commissioner, dated August 20, 1963, which was also read by the Council before passing the

resolution, state:

Incidentally, it may be stated that the Government of India, Ministry of Steel and Heavy Industries, New Delhi, who were requested to release the

above 5 Nos. T.M.B. Chassis referred to above, which was frozen by the Government have refused to release these vehicles in favour of the

Corporation as the number of vehicles allotted for civilian purposes is inadequate. Therefore separate action has been taken to purchase suitable

vehicles in lieu, of these 5 Nos. T.M.B. vehicles.

The implication of this is obvious and the Council must have known that Tata Mercedes Benz chassis could not be purchased. I conclude on

the materials on record relating and leading to resolution No. 210 of 1964 that the Council by that resolution sanctioning Rs. 16,00,000 impliedly

and necessarily approved the contract entered into by the Commissioner with Khivraj on August 30, 1963. I hold, therefore, that the contract is

neither illegal nor improper and that no rule can issue. The petition is dismissed but with no costs.