Uni Ads (P) Ltd. vs APSRTC and Another

P. Venkatarama Reddi, J.—The core question that arises for consideration in this writ appeal directed against the order dismissing the writ petition of the appellant is whether the appellant is entitled for renewal of the con tract for the display of advertisements on the buses of the Andhra Pradesh State Road Transport Corporation (hereinafter referred to as ''the Corporation'')- The petitioner was awarded this contract in the year 1989 (w.e.f. 1-1-89) and the period of contract expired by 31-12-1994.The appellant Agreed to pay the corporation a sum or Rs. 360 lakhs in annual instalments. The appellant made a representation to the Managing Director of the Corporation on 31-8-94 seeking extension of the contract for a further period from 1-1-95. He offered to pay an extra sum of Rs.108 lakhs. Without conceding to this request, the Corporation by notification issued in September, 1994, called for tenders for the appointment of advertising agents for each Zone for display of advertisements on buses. The last date for submitting the tenders was 31-10-94. The writ petition was filed on 28-10-94. After it underwent some adjournments, it was heard and decided by the learned single Judge on 4-11-94. By the time the writ petition was heard, the tenders were opened. The learned single Judge has referred to the statement made by the learned Standing Counsel for the Corporation that the Corporation would be able to get a revenue of Rs. 26 crores as per the offers received.

The learned Counsel for the appellant contends that in view of the experience gained by the appellant and the prompt payment of the instalments due to the Corporation, his request for renewal on payment of the extra amount of Rs. 108 lakhs should have been favourably considered, especially when such renewal was'' granted in favour of one ANL Parcel Service. It is submitted that the action is arbitrary, discriminatory and mala fide.

We are not in a position to accept the contentions of the learned Counsel for the appellant. We find no legal infirmity in the order under appeal and no exception can be taken to the view expressed by the learned single Judge that the corporation has followed the best method of calling for tenders and the appellant has no right to claim for renewal of the contract.

It is not in dispute that the agreement entered Into between the appellant and the Corporation on 20th May 1988 does not provide for renewal or extension of the contract period. One of the clauses of the Agreement contemplates the effacement/removal of advertising material within a week of the expiry of the contract period. The appellant cannot also find fault with the method of awarding the contract by calling for fresh tenders. Calling for tenders with a view to obtain the best possible offer is the normal rule so well entrenched in the realm of public law of our country in the matter of ward of contracts and other largess by the State and its instrumentalities. In fact a deviation from this rule is often frowned upon by the Constitutional Courts which expect adequate justification for adopting a different method. The observations of Bhagwati, J. speaking for the three-Judge bench of the Supreme Court in Kasturi Lal Lakshmi Reddy, Represented by its Partner Shri Kasturi Lal, Jammu and Others Vs. State of Jammu and Kashmir and Another, are quite pertinent in this context. It was observed while re-stating the legal position enunciated in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, .

"The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in an unprincipled manner; it has to be exercised for the public good. Every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. E very action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated......"

Then, at paragraph 14 it was further observed:

"Where any governmental action fails to satisfy the test of reasonableness and public interest discussed above and is found to be wanting in the quality of reasonableness or lacking in the element of public interest, it would be liable to be struck down as invalid. It must follow as a necessary corollary from the 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 Government, therefore, cannot, for example, give a contractor sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so. Such considerations may be that some Directive Principle is sought to be advanced or implemented or that the contract or the property is given not with a view to earning revenue but for the purpose of carrying out a welfare scheme for the benefit of a particular group or section of people deserving it or that the person who has offered a higher consideration is not otherwise fit to be given the contract or the property. We have referred to these considerations only illustratively."

Tested from the standpoint of these principles, we are unable to see how public interest will be better served by granting the renewal of contract to the appellant on payment of extra sum acceptable to the appellant. There is also no good reason why the normal and best-known method of awarding the contracts should be deviated from, by the Public Corporation. In the instant case, if any assurance of the propriety of procedure adopted by the Corporation is needed, it is found in the actual offers the Corporation received pursuant to the tenders called for by them. There is vast disparity between the appellant''s offer and the offers received by the Corporation in respect of the tenders. The learned Counsel for the appellant, in the course of arguments, hinted at the possibility of some of the tenderers backing out. Citing the instance of one Koneru Constructions whose bid perhaps was the highest in respect of Hyderabad zone, the learned Counsel submitted that the offers are unrealistic and may not be acted upon further. We find it difficult to accept this contention. One instance of retreating from bid should not be treated as an indicia of a similar pattern of withdrawal by other tenderers especially when such contingency would lead to the risk of losing the earnest money deposit which is substantial. At any rate, we cannot assume so at this stage.

We shall now advert to the main contention of the learned Counsel for the appellant which was also raised before the learned single Judge. The appellant cites the case of M/s. ANL Parcel Service in whose favour the renewal was given for a period of six years without calling for fresh tenders. It is submitted that the appellant is entitled to similar treatment and by denying such treatment, Article 14 of the Constitution is violated. This argument does not appeal to us. Firstly, as pointed out by the learned single Judge and as reiterated before us by the learned standing Counsel for the Corporation, the Corporation has high stake in that Company, it being 50% equity-share holder. It is also stated that M/s. ANL Company is an ancillery industry set up to cater to the requirements of the Corporation. That apart, the nature of the contract is also different. The contract in that case was for carrying parcels whereas in the instant case the contract is for display of advertisements. Since the last contract was awarded, a basic change has been introduced by the Corporation by calling for tenders zone-wise. This again materially alters the nature and scope of the contract. Above all, a single instance of renewal of a contract without calling for tenders should not be treated as an eternal guide in all other cases of contracts to be awarded in future by the Corporation. On the basis of renewal of one contract, it cannot be said that the Corporation should hereafter follow the rule of renewal by negotiating with the existing contractors and give a go-bye to the well-accepted principle of calling for tenders for all time to come. One error (assuming it to be so) need not lead to another. If it is otherwise, there is bound to be detriment to the public interest and the goal which a State-owned Corporation is expected to achieve. The plea of uniform treatment in the context of extension of renewal in such a situation would be fallacious and counterproductive. We may also observe that the propriety of renewing the contract to ANL Company is not an issue before us. Merely because it has not been questioned, the procedure adopted there in does not assume sanctity and it need not necessarily be followed in all cases of contracts irrespective of considerations of public interest. We therefore reject the plea based on Article 14 of the Constitution.

Though it was suggested by the learned Counsel for the appellant in the course of arguments that the Managing Director had acted mala fide with a view to deny the contracts to the appellant, there is no factual foundation for such plea either in the affidavit or in any material placed before us. No such argument was advanced before the learned single Judge.

In the result, we are not inclined to entertain the appeal. The writ appeal is therefore dismissed at the admission stage. No costs.