Hasbi Traders vs The Chief Engineer (Distribution), Tamil Nadu Electricity Board, Madurai Region and Others

D. Murugesan, J.—The substantial question raised in this writ appeal is as to whether the respondent-Tamil Nadu Electricity Board could

reject the tender of the appellant without assigning any reason.

Bids were called for by tender notification dated 7.11.2003 for sale of scraps and the appellant had submitted its tender for lot Nos. 5, 9, 13 &

14 and quoted a total rate of Rs. 22,10,000/- and also remitted a sum of Rs. 1,10,500/- towards earnest money deposit being 5% of the total

value of the scrap. The tenders were opened on 3.12.2003 and the appellant was the highest bidder, as it quoted Rs. 40,000/- more than the next

highest bidder. However, the said tender was not accepted and the same was communicated by the letter of the Chief Engineer (Distribution),

Tamil Nadu Electricity Board, Madurai Region dated 21.2.2004. The said letter reads as under:

Tamil Nadu Electricity Board

From

The Chief Engineer (Distribution)

Tamil Nadu Electricity Board

Madurai Region, Madurai-7

To

M/s Hasbi Traders

No. 17-A, Gopal Street

Tiruvannamalai 606601

Letter No. CE/D/MDU/Specn.7/2003-04/D.761/2004 dt.21.2.2004

Dear Sirs,

Sub: Madurai Region-Specn. 7/2003-04 � Dindigul EDC - Disposal of Scrap Tender opened on 3.12.2003 - Unsuccessful Tenderer �

Refund of EMD � Reg.

Ref: 1. Specification No. 7/2003-2004

Your Tender dt. 3.12.2003.

-----

Your offer for the Lot Nos. 5, 9, 13 & 14 in the Tender opened on 3.12.2003 is not accepted. The EMD amount of Rs. 1,10,500/- (Rupees One

Lakh Ten Thousand and Five Hundred only) paid by you is hereby ordered to be returned.

You are requested to contact Superintending Engineer/Dindigul Electricity Distribution Circle/Dindigul for getting the refunds of the above EMD.

Yours faithfully,

Chief Engineer (Distribution)

Madurai

The writ petition came to be filed questioning the said order and one of the contentions of the appellant-writ petitioner is that the impugned letter is

illegal, arbitrary and violative of Articles 14(2) and 19(1)(g) of the Constitution of India, inasmuch as it did not contain any reason. The learned

single Judge dismissed the writ petition on the ground that the writ petitioner has no right to ask that its tender should be accepted. As against the

said order, the present writ appeal is filed.

We have heard Mr. M. Krishnappan, learned senior Counsel appearing for the appellant and Mr. P. Srinivas, learned Counsel appearing for the

respondent-Electricity Board.

The Tamil Nadu Electricity Board is a public authority and even in contractual matters, it cannot have an unfettered discretion and in contracts

having commercial element even though some extra discretion is to be conceded in such authority, it is bound to follow the norms recognised by

courts while dealing with public property. This requirement is necessary to avoid unreasonable and arbitrary decisions being taken by public

authorities whose actions are amenable to judicial review. Clause 5(b) of the tender specification empowers the Tamil Nadu Electricity Board to

reject any or all the tenders without assigning any reasons there of whatsoever. Even though such discretion is given to the authorities, whether it

could be exercised in an arbitrary manner is a question to be further considered In Ramana Dayaram Shetty Vs. International Airport Authority of

India and Others, as well as in Ajay Hasia and Others Vs. Khalid Mujib Sehravardi and Others, , the Supreme Court has held that an

instrumentality of the State should act within the ambit of Rule of Law and would not be allowed to conduct itself arbitrarily and in its dealings with

the public would be liable to judicial review.

In fact the very same question as to whether this Court would be justified in interfering with such orders of rejection of tender without any reason

came up for consideration before the Supreme Court in Star Enterprises and Others Vs. City and Industrial Development Corporation of

Maharashtra Ltd. and Others, and in paragraph-9, the Supreme Court has held as follows:

The question which still remains to be answered is as to whether when the highest offer in response to an invitation is rejected, would not the public

authority be required to provide reasons for such action? Mr. Dwivedi has not asked us to look for a reasoned decision but has submitted that it is

in the interest of the public authority itself, the State and everyone in the society at large that reasons for State action are placed on record and are

even communicated to the persons from whom the offers came so that the dealings remain above board; the interest of the public authority is

adequately protected and a citizen knows where he stands with reference to his offer.

In the very same judgment, as to the power of judicial review of administrative action, the Supreme Court has held as follows:

In recent times, judicial review of administrative action has become expansive and is becoming wider day by day. The traditional limitations have

been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast pervasive. As the State has descended into

the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social

audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executive actions including cases of

rejection of highest offers. That very often involves large stakes and availability of reasons for actions on the record assures credibility to the action;

disciplines public conduct and improves the culture of accountability. Looking for reasons in support of such action provides an opportunity for an

objective review in appropriate cases both by the administrative superior and by the judicial process.

Mr. P. Srinivas, learned Counsel appearing for the Tamil Nadu Electricity Board, however, would submit that though the order dated

21.2.2004 had not assigned any reason for not accepting the tender, pursuant to the notice issued by the very same appellant dated 28.2.2004, a

reply was sent to him on 5.3.2004 stating that the tenders have not been approved by the tender committee as the market rate was higher than the

rate offered by the tenderers. Hence the appellant had been communicated with the reasons which would satisfy the act of the authority as to its

fairness. We are not inclined to accept the said submission as the order impugned before this Court should be judged with reference to the

contents of the order. The Tamil Nadu Electricity Board is not entitled to withdraw its case later on after the orders were passed. That apart, by a

subsequent order dated 5.3.2004, though the respondent-Board had taken the stand that the tender of the appellant was not accepted as the same

was not approved by the tender committee as the market rate was higher than the rate offered by the tenderers, in the counter affidavit it takes

entirely a new stand for not accepting the tender of the appellant. In paragraph-4 of the counter affidavit, it is stated that contrary to Clause 6(e) of

the tender specification in quoting separate amount for four lots, namely, lot Nos. 5, 9, 13 & 14, the appellant had quoted a lumpsum of Rs.

22,10,000/- for all the four lots, which is in violation of the tender specification. From the above two different stand taken by the respondent-

Board, it appears to us that even the respondents were not confident of the reasons for which the tender of the appellant was not accepted and the

same was communicated by the letter dated 21.2.2004. Further the counter affidavit cannot supplement the reasons as held by the Supreme Court

in Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and Others, . In paragraph-8 of the said judgment, the

Supreme Court has observed that ""the validity of an order must be judged by the reasons so mentioned and the order cannot be supplemented by

fresh reasons in the shape of affidavit or otherwise."" Hence the reliance placed by Mr. P. Srinivas, learned Counsel for the respondent-Board that

the reasons for the rejection were communicated to the appellant subsequently cannot cure the defect in respect of the violation of Article 14 of the

Constitution of India.

For the foregoing reasons, the letters dated 21.2.2004 and 5.3.2004 impugned in the writ petition are quashed and the writ appeal is allowed to

that extent. It is open to the respondent-Board to either call for negotiations with the highest bidders and finalise the tender or to call for fresh

tenders. Consequently, W.A.M.P. No. 3813 of 2004 is closed. No costs.