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Judgment
This judgment will dispose of .ill the four writ petitions since they are interconnected.
In this batch of four writ petitions two Societies South Central Railway Labour Contract Co-operative Society Limited, Rajahmundry (hereinafter jailed as SCRLC Co-operative Society) and Food Corporation of India Jattu Sangham, Dowleswaram East Godavari District (hereinafter called as FCI Jattu Sangham) are fighting for securing the contract relating to loading and unloading/handling and transporting of foodgrains from the godown belonging to the Food Corporation of India (hereinafter called as FCI) at Dhowleswaram. The godown is provided with railway siding facilities. On 19- 6-86 the publication regarding tenders was made. The last date for opening of the tenders was 11-7-86 and it was subsequently extended to 25-8-86. The period of contract was for two years from 9-9-1986. In response to the above invitation seven tenders were received by the F.C.I. The lowest tender was that of Central Ware Housing Corporation Hamali''s Union which was later withdrawn by it. Out of remaining six. the lowest tender was that of the SCRLC Co-operative Society. On 23-8- 86 the Senior Regional Manager, FCI sent a telegram to the SCRLC Society informing whether it was willing to remit the 50 per cent security deposit before commencement of the work. The SCRLC Society sent a reply on 25-8-86 expressing its willingness to remit the entire security deposit of Rs.62,500/- before the commencement of the work and'' in fact on 4-9-86 it had deposited the amount by way of term deposit on behalf of the Senior Regional Manager and intimated the same accordingly. Without accepting any of the tenders, the Senior Regional Manager FCI issued another notification on 5- 12-86 calling for fresh tenders in respect of the same work; the last date for receipt of tenders was notified as 24-12-1986. In response to this notification six tenders were received. When the tenders were opened on 24-12-1986 at 3 P.M., the tender submitted by the FCI Jattu Sangham was found to be the lowest. Even then the Senior Regional Manager did not award the contract to any one.
W. P. 14316/86 was filed by the SCRLC Co-operative Society contending that as the tender submitted by it was the lowest, it is entitled to be entrusted with the contract: the action of the Senior Regional Manager in extending the last date for receipt of the tenders from 25-8-86 to 9-9-1986 was illegal and uncalled for. When they have deposited the entire security deposit amount there was no valid reason for not granting the contract in their favour. W. P. 12241/87 was filed by G. Ram Babu President of the FCI Jattu Sangham contending that as the Sangarn was the lowest tenderer in response to the second notification made on 22-11-86 its tender should be accepted. He also alleged that with a mala fide intention the Senior Regional Manager FCI was not accepting the lowest tender. In W. P. 14316186 SCRLC Co-operative Society sought for an interim order directing the Senior Regional Manager, FCI to permit the Society to take up the work but this Court did not grant such an order. When that writ petition was filed the second notification inviting tenders was not issued. Soon after the second notification was issued the SCRLC Co-operative Society filed W. P. 17150186 for a Mandamus directing the FCI to appoint .the petitioner-Society as the Contractor. The Society also prayed for an interim order for stay of all further proceedings pursuant to the second notification. This Court granted an interim order staying the finalisation of the tenders received pursuant to the second notification. The SCRLC Co-operative Society filed another interlocutory application WPMP No. 13998/87 praying that they may be Permitted to float an ad hoc tender for execution of the work. By an order dt. 14 87, this Court directed the FCI to give ad hoc tender in favour of the SCRLC Co-operative Society for a Period of three, months. Thereafter the FCI Jattu Sangam filed another writ Petition W. P. 14272187 contending the by playing fraud on the Court SCRLC Co-operative Society obtained the interlocutory order regarding floating of ad hoe tender E making a false representation that previous] SCRLC Co-operative Society was working a transport contractor of the FCI when in fact for the first time after the godown was Constructed tenders were called. The FCI Jattu Sangham, therefore, sought a writ a Mandamus directing the Senior Regional Manager FCI to cancel the ad hoc tender.
The stand taken in the counter-affdavit filed on behalf of the FCI was that all the enders were rejected because of rates offerred by the tenderers were unworkable. A Committee of officials which was asked to study the whole matter reported that the rates offered were not financially viable. A decision as therefore taken to refloat fresh tenders. The allegations of mala fides were denied. As there was an interim order not to finalise the riders received subsequently in response to the second notification. it was pleaded that action could be taken in that regard.
At the time of the arguments Shri Pornaiah learned counsel for the FCI stated at even the rates offered be the tenderers pursuant to the second notification also were workable and therefore, the FCI has aided to scrap the second batch of tenders also.
Shri Krovvidi Narasimham, learned counsel for the SCRLC Co-operative Society contends on the authority of Supreme. Courts ruling in Harminder Singh Arora Vs. Union of India (UOI) and Others, that the SCRLC Co,-operative Society being the lowest tenderer entitled to be appointed as the contractor. The scraping of the first batch of tenders was highly arbitrary and illegal.
Smt. Gandhi Madhavi, learned counsel for the FCI Jattu Sangham, urges that when once the first batch of tenders were scraped, the FCI has no option except to accept the lowest tender received pursuant to the second notification and the tender of the FCI Jattu Sangham being the lowest, must therefore, be accepted.
Shri M.S. Sastry, appearing for one of the impleaded respondents who tendered at a very low rate but withdrew the same contends that the FCI Jattu Sangham being the lowest tenderer pursuant to the second notification must be awarded the contract.
On the other hand, Shri. Poorniah, learned counsel for the FCI argues that on both the occasions the tenders received were highly unworkable, the rates offered were not financially viable and if the FCI was to accept the Lower tender it would result in huge financial loss. The, amount involved in the contract was to the extent of Rs.20 lakhs and there is a real risk of the contractors abandoning the work in the middle or the workers resorting to the pernicious practice of extracting money by way of tips and bribes from the persons whose goods they have to carry from the godown to various places in the district. He also says that as Per the tender condition the Senior Regional Manager has the right to reject any or all the tenders without assigning any reason and there is no obligation to accept the lowest tender.
From the Contentions urged by the learned counsel for both sides it has to be considered whether the Senior Regional Manager, FCI is empowered to reject the tenders? and whether the petitioners are entitled to be entrusted with the contract in question ?
Cl. (10) of the lender conditions clearly states that:
''The Senior Regional Manager, Food Corporation of India, Hyderabad for and on half of the Food Corporation of India reserves the right to reject any or all the tenders without assigning any reason and does not bind him to accept the lowest or any tender."
Could it be said that this is an arbitrary clause? I think the answer is in the negative. It is not as if the Senior Regional Manager has exercised by power arbitrarily in the garb of rejecting the tenders. The FCI falls within the ambit of Art. 12 of the Constitution and. therefore. its actions can be judicially reviewed under Art. 226 of the Constitution by this Court. The FCI being an instrumentality of the Government.
"Would obviously be subjected to the same limitation in the field of constitutional and administrative law as Government itself though in the eye of the law it would be a district and independent legal entity." (vide Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, .
The Supreme Court also ruled in that case that
"When Government enters into contracts or issues licences it 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 norm which is not arbitrary. irrational or irrelevant."
The Government has power to accept or reject any bid without assigning any reason if such a power is conferred on it either in the statute or in the under conditions. (vide State of Orissa and Others Vs. Harinarayan Jaiswal and Others, .
"The Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tenderer.'' (vide Trilochan Mishra, etc. Vs. State of Orissa and Others, .
Following this ruling in Purxotoma Ramanata Quenim Vs. Makan Kalyan Tandel and Others, similar clause empowering the Government to accept or reject any bid without assigning any reason was upheld. Adverting to these three decisions it was observed in Ramana J.. I. A. Authority of India (supra) by the Supreme Court that such a power does not empower the Government to act arbitrarily without reason. There must he some relevant reason for preferring one tenderer to another.
What are the reasons for the Senior Regional Manager, FCI to scrap both the tenders in the present case''? The SCRLC Co- operative Society submitted its tender in the first hatch of te6ders at 45.5 per cent below the schedule of rates.
The F.CI Jattu Sangham through its President submitted its tender in the first instance offering to take up the work at a rates) per cent below the schedule of rates. On the second occasion the SCRLC Co-operative Society offered at the same rate - 45.5 per cent below the schedule of rates. The Jattu Sangham in the second hatch of tenders offered 47.5 per cent below the schedule of rates. In the-counter-affidavit it is stated that although in the beginning it was felt that because SCRLC Society was the lower tenderer they were asked to remit the earnest money deposit but later on it was realised that the rates offered were unworkable. The counter clearly sets out the position
"Though it was in initially decided to ask the Society to deposit the entire security deposit amount and award the contract to them it was felt on further examination that these offers are being made on account of the cut- throat competition only and the Senior Manager apprehended for Rs.20/- lakhs they may be let down in the middle by these people and it is better to go into the matter in depth by appointing a committee before taking a final decision as it was felt that even 45.5 per cent would not be financially viable and would be unworkable.
A Committee of Officers comprising Senior Regional Manager. Joint Manager ( F and A) and the Deputy Manager (Contracts) reviewed the entire issue and finally decided that awarding of contract at unworkable rates would encourage undesirable practice on the part of the labourers to extract tips from the parties and may also lead to undesirable practice of pilferages etc. Alternatively it may result in the contractor abandoning the work at a crucial stage of the operations leading to infructuous risk and costs arrangements. It was also decided to test the market once again after letting the matters to settle down to see whether the rates now received are really representative. Further in view of the flood situation in the district there may not be any immediate need to operate these godowns as rice deliveries would be very much limited during the current kharif in the district. Thus, this committee has decided to scrap the tenders floated on 16-6-86 and to refloat fresh tenders."
I have perused the entire file produced by Shri Poornaiah, learned counsel for the F.CI. The averments in the counter are based on the notings in the file. It is not as if a single individual had taken a whimsical decision to scrap the tenders. It was felt in the interests of the Organisation that when there was cut- throat competition amongst labour unions to grab the work. it would riot be desirable to entrust the work at highly uneconomical rates. The consequences of such hazardous entrustment also were noticed by the committee of officials: The labourers would resort to the undesirable practice of extracting tips from the parties and may also indulge in pilferage of the goods. These are very relevant considerations and good reasons for scraping the tenders. Ability to carry out the contract without indulging in any undesirable practices is one of the circumstances, that must weigh the authorities in accepting or rejecting the tenders. Merely because a person happens to he the lower tenderer he has no right to claim that the contract must be entrusted to him. If the entrustment of the contract to any of the parties in such a situation would result in unlawful activities the very nature of exercise of power in such circumstances would be improper and unreasonable vide Satyanarayana Gupta v. Govt. of A. P., (1970) 2 Andh WR 25.
When the Food Corporation of India fell after considering all the relevant circumstances that no person could work the contract satisfactorily at rates below 45 per cent of the schedule of rates, it is not for this Court to sit in judgment over that decision, when it is not shown that the decision was the result of any extraneous considerations. Merelx. because the SCRLC Co-operative Society happened to be the successful contractor in respect of Central Warehousing Corporation in the past that is no ground to draw the inference that its tender must be accepted. It is not the case of the SCRLC Co- operative Society that in respect of Central Warehousing Corporation also its tender was at rates below 45 per cent of the schedule of rates. At any rate, such an enquiry is out side the purview of the present writ petition.
The ruling of the Supreme Court in Harminder Singh Arora Vs. Union of India (UOI) and Others, so strongly relied upon by Shri Narasimham would not advance the case of the SCRLC Co-operative Society. The ruling is an authority for the proposition that tender conditions must be complied with and a person who has not complied with the tende,r conditions should not be entrusted with the contract at a higher ignoring the claims of the lowest tenderer who complied with all the tender conditions.
In the instant case, the facts clearly point out that the Senior Regional Manager, FCI is not interested in unjustly backing up the claims of any one who submitted tenders either in compliance with the first notification or the second notification. His anxiety is only to safeguard the interest of the FCI, by avoiding the situation of the FCI falling into financial difficulties and lose its reputation. There is no element of arbitrariness much less favouritism in the action taken by the Senior Regional Manager FCI. The power to accept or reject any of the tenders without assigning any reasons has not been misused by the Senior Manager F(,''1. No oblique considerations weighed with him. As the .tenders received pursuant to the second notification also suffered from the same infirmities noticed in the tenders received in response to the first notification, the Senior Regional Manager. has no choice except to scrap both the tender. His action, therefore, cannot be faulted oil any ground.
For the foregoing reasons all the writ petitions fail and accordingly they are dismissed but in the circumstances without costs.
It is open to the FCI to call for fresh tenders and after taking into consideration all the relevant circumstances they may take appropriate action regarding entrustment of the work in question. This judgment will not affect the present ad hoc arrangement in FCI entered into with SCRLC Co-operative Society.
There shall be no order as to costs.
Petitions dismissed.