ORDER
S. B. Majmudar, C. J.
1. These fourWrit Appeals and five Writ Petitions raise common questions of law and fact and hence they were heard together by consent of learned Advocates of respective parties and are being disposed of by this common judgment.
2. The Food Corporation of India is a common respondent-1 in all these proceedings.
3. It is a statutory Corporation having been constituted by the Central Government under S. 3 of the Food Corporation of India Act, 1964. Its main object is of implementing Food Policy and for taking-up State Trading in food stuffs on an appropriate scale and to build up buffer stocks gradually etc. As it is a Statutory Corporation, it is a 'State' within the meaning of Art. 12 of the Constitution of India being covered by the phrase 'Other Authority' as mentioned thereunder. There is no dispute between the parties on this aspect. The Supreme Court in the case of The Workmen of the Food Corporation of India v. M/s. Food Corporation of India, : (1985)IILLJ4SC has in turn held as aforesaid.
4. For performance of its statutory function prescribed under S. 13 of the Act, the respondent-1 Corporation has to undertake the purchase, storage, movement, transport, distribution and sale of food-grains and other foodstuffs. It therefore has to set-up godowns depots and other storage facilities and to engage labour for handling foodgrains at the godowns or in transit. Unloading the food-grains bags from railway wagons, reloading them in transport vehicles and again unloading them from the transport vehicles at the end to stock them in the godowns is the main activity carried on by the Corporation by utilising the service of large number of workmen, these very workmen have also to carry-out the reverse activity of shifting the stocks food-grains from the godowns, so that ultimately they are reloaded in railway wagons at railway stations for transporting foodgrains to different parts of the country. Earlier in some of the Godowns like Siliguri Depot, workmen were directly employed by the respondent-1 Corporation presumably at piece-rate for service rendered by them,subsequently intermediary contractor was introduced and through such contractor work were being engaged as contractor's employees.
5. In the present group of matters we are concerned with contracts for handling food-grains as entered into by respondent-1 Corporation with respondent-4 Co-operative Society at Kolar Gold Field and Bangarpet godowns in Kolar District and also at Bommapur godown in Hubli District. These contracts have been brought in challenge on various grounds by writ petitioners in five petitions as well as by appellants in the writ appeals. As writ appeals arise out of interim orders passed by the learned single Judge in the concerned writ petitions and as the writ petitions themselves are being disposed of by this common judgment, the learned Senior Counsel for the writ appellants rightly stated that these writ appeals do not survive any further. Hence, writ appeals Nos. 1496 and 1497 of 1993 and writ appeals Nos. 1692 and 1693 of 1993 are liable to be disposed of as infructuous. So far as the writ petitions are concerned they consist of two groups, the first group consist of writ petition No. 19921 and 19922/1993 and W. P. No. 24272/93. They challenge the award of contract for handling of foodgrains as entered into by respondent-1 Corporation in favour of respondent-4 Cooperative Society so far as Kolar Gold Field and Bangarpet godowns in Kolar District are concerned. For short this group will be referred to as KGF group.
6. The second group of writ petitions consist of W.P. Nos. 19907 and 19908/1993. They challenge the award of contract by respondent-1 Corporation to 4th respondent Society for handling the foodgrains at Bommapur godown in Hubli District. It will be referred to as Hubli group.
7. In order to appreciate the nature of controversy between the parties it will be advantageous to indicate at the outset a few background facts leading to these proceedings.
Background Facts in KGF Group andRival Contentions concerning the same.
8. In W. P. Nos. 19921/93 and 19922/93 the petitioner-1 is a Co-operative Society within the meaning of the said term under S. 2 of the Karnataka Co-operative Societies Act, 1959 and the Rules framed thereunder. This Society has been organized for the benefits of the loading, un-loading and transport workers employed in various organisations in Karnataka State. The petitioner-2 is the Union of Workers engaged in the aforesaid work. As noted earlier respondent-1 is the Food Corporation of India, and respondents 2 and 3 are the officers of the said Corporation who oversee the working of loading and unloading of food-stuffs at the concerned godowns of respondent-1 Corporation. Respondent No. 4 is a Co-operative Society registered under the provisions of the Karnataka Co-operative Societies Act and Rules. It has been registered on 13-4-93. It is the case of the petitioners that 4th respondent has been brought into existence by one Mukhtar Ahmed as the President, who was the handling and transport contractor of Food Corporation of India godowns in and around Bangalore city during the year 1991-92.
9. The respondent-1 Corporation has its Headquarters at New Delhi. It issued a circular No. 1/63/1989/Cont. dated 19-1-1989 to respondents 2 and 3 and others to the effect that in view of the demand of workers and the Unions functioning in the various Depots of the Corporation and for regularising the service in the Corporation the need was emphasised for replacing the Contract labour system in FCI Depots by forming Labour Co-operative Societies and entrusting the work in the FCI Depots to workers of handling and transport of food grains in the Co-operative Society. As a direct consequence of this it was emphasised that senior officers of Food Corporation of India should visit all the depots and talk to the Labourers working in the Depots and help them in forming Labour Co-operative Societies and getting them registered with the Registrar of Co-operative Societies. For this purpose officers were directed to prepare lists containing the names, ages, etc., of the labourers working under the Contract Labour System prior to the Circular dated 19-1-1989. Thesaid Circular has been annexed to the petition at Annexure-A. The F.C.I. had also issued circular No. F1/63/89/Cont. dated 16-3-1989 as a follow-up of its Circular at Annexure-A advising its subordinate officers like respondents 2 and 3 to extend various facilities and concessions and render assistance to the Labour Co-operatives so that there will be only one Labour Co-operative Society per godown complex. It was also stated therein that calling for tenders for awarding such contract work should be avoided and such contract should be awarded to such labour co-operatives of workers earlier working under erstwhile contractors in the said godowns on the basis of current market rates. A copy of the said circular is annexed to the writ petitions at Annexure-B.
10. The handling and transport work in connection with food grains at the FCI godown, Coramandal (KGF) and Bangarpet godowns in Kolar District was earlier being handled by private contractor and his term expired on 30-6-1993. It is the case of the petitioners that the workers who are working in these godowns are all members of not only the petitioner-1 Society but also of the petitioner-2 Union. They are not members of respondent-4 Co-operative Society. The petitioner-1 also alleges that it is Handling H and T work in all the godowns and Railheads in and around Bangalore since 1-9-1991 and in Hubli from 1-4-1972.
11. The respondent-1 invited tenders for appointment of loading, unloading, handling and transport contractors at FCI godowns in KGF and Bangarpet under its tender No. S & C/13(17)/93 Cont. D/-26-3-1993. It is the case of the petitioner-1 that as it was already handling H & T work in all the godowns and railheads in and around Bangalore and Hubli and since the workers working in the KGF and Bangarpet are the members of the 2nd petitioner Union and 1st petitioner Society, the petitioner-1 Society offered its quotations in the prescribed tender form. It quoted 35% above the Schedule of rate for services as promulgated by FCI subject to negotiation. The respondent-2 in response to the tender given by the petitioner-1 Society wrote a letter on 28-4-93 and called upon the petitioner-1 Society to furnish a list of local labourersenrolled as members of the said Society for the purpose. It is the case of the petitioner-1 Society that immediately it furnished the 2nd respondent the required particulars.
12. On 15-4-1993 at about 2.30 p.m. tenders received by second respondent were opened. It was found that petitioner-1 Society quoted 35% above the Schedule of rates, the 4th respondent quoted 329% above the schedule of rates in its tender, while the lowest rates of 18% were quoted by a private contractor and 243% were quoted by one another workers' Co-operative Society viz., Food Labour Contractor Co-operative Society which is the petitioner in W. P. No. 24272/93. It is the case of petitioner-1 in writ petitions 19921 and 19922/93 that the contract should have been awarded to the petitioner-1 in the light of the policy decision taken by respondent-1 Corporation as per annexure-A and B. It, however, transpired that the 2nd and 3rd respondents officers of the Corporation only called 4-respondent for negotiation for the purpose of awarding contract to it even though it quoted higher percentage of rate i.e., 329% above the tender rate, which was more than the lowest rate of 189% above the schedule of rates. The petitioner-1 was not called for such negotiation and behind its back contract was awarded to respondent-4. Its case is that this has been done with the sole ulterior object of avoiding giving contract to petitioner-1 Society and to favour unduly 4th respondent Society promoted by Mukthar Ahmed, Ex-FCI contractor as its President. It is under these circumstances that W. P. Nos. 19921 and 19922/93 have been moved by the petitioners' Society and the Workers Union respectively for issuance of suitable writ, direction or order directing respondents-1 to 3 to award contract for loading, unloading, handling and transport for the FCI godowns at KGF and Bangarpet pursuant to tender D/-26-3-93, to petitioner Society since it alone fulfilled requirements of Annexure-A and B issued by FCI. It has also prayed that respondents 1 to 3 be directed not to award contract to respondent-4 for loading, unloading and for transport work at FCI godowns at KGF and Bangarpet, so long asits rates are higher than the present contractor and so long as it does not fulfil requirements of Annexure-A and B.
13. These petitions have been stoutly opposed on behalf of respondents 1 to 3 by their Senior Counsel as well as by the Senior Counsel appearing for respondent-4 Society. In substance their case is that as per Annexure-A and B the contracts are to be awarded to Labour Co-operative Society of the labourers who were working in the godowns earlier under the ex-contractor and therefore the respondent-4 Society was awarded the contract as its members comprise of the majority of such workers of erstwhile contractor, while petitioner-1 Society is functioning at Bangalore and majority of the local workers earlier working at the concerned godowns are not its members. That tenders were invited with a view to ascertain the market rate for handling such work and it was not contrary to the policy laid down under Annexure-A and B. That as respondent-4 Society had its members, majority of local workers who were earlier working at the godowns under excontractor, for further negotiations only respondent-4 Society was called and when it agreed to reduce its rates to the lowest as offered by a private contractor, contract was awarded to it. That even the Asstt. Registrar of Co-operative Societies had recommended that contract could be awarded to respondent-4. That considering all these aspects it cannot be said that the action of the FCI in awarding contract to respondent-4 is in any way arbitrary or irrational so as to attract Art. 14 of the Constitution of India.
14. Mr. Vasudeva Reddy, learned Senior Counsel appearing for respondent-4 submitted that only because ex-contractor was associated with respondent-4 Society, it cannot be said that the Society was not a genuine Society of erstwhile workers of private contractor or that it was outside the scope and ambit of the policy laid down under Annexure-A and B. That on the contrary the said ex-contractor was working as good samaritan and he tried to help his erstwhile workmen to organize themselves into a labour co-operative society so that they can get continuity of service by getting thecontract at the concerned godowns. That there was nothing wrong in the Asstt. Registrar of Co-operative Society recommending their case. There were sufficient safeguards under Co-operative Societies Act to check the arbitrary acts of any of the President of the Co-operative Society.
15. In W. P. No. 24272/93 Food Labour Contract Co-operative Society, as petitioner, has challenged the very same award to contract by respondents 1 to 3 to the res-pondent-4 Society for handling and transport of foodgrains at the F.C.I. godowns situated at KGF and Bangarpet in Kolar District. Its case is that in the group of Co-operative Societies which had submitted tenders for the said work, the rate offered by the petitioner-Society was the lowest viz., 243% as compared to 350% above the schedule of rates as offered by pctitioner-1 Society in Writ Petitions Nos. 19921/93 and 19922/93 as well as rate of 329% above the schedule of rates as offered by the 4th respondent. Therefore it should have been awarded the contract. In any case when further negotiations took place between respondents-2 and 3 on the one hand and respondent-4 on the other, under which respondent-4 agreed to reduce its rate to 189% above the schedule of rates, in fairness petitioner-Society should have been called for negotiation so that it could have also, if thought fit reduce its rates. That opportunity was not given to the petitioner and behind its back negotiations were made in a one sided manner and consequently action of the respondents 1 to 3 in awarding contract to respondent-4 is ex facie arbitrary and violative of Art. 14 of the Constitution.
16. Learned counsel for respondents on the other hand have submitted that petitioner-Society docs not have a single member from the local labour force and therefore it was incompetent to stand in competition with respondent-4 and as per policy decision, Annexure-A and B, contract could not have been awarded to the petitioner and therefore there was no occasion for calling it for further negotiation. In fact tenders were invited to ascertain the correct market rate of labour charges for such work and having ascertainedthe correct market rate contract was awarded to respondent-4 Society which was most fit and suitable for being awarded such work as per policy decision Annexure-A and B.
Background Facts in Hubli Group and Rival Contentions concerning the same:
17. Petitioners in Writ Petitions Nos. 19907 and 19908 of 1993 are the Co-operative Society of workers as well as their union respectively. They have brought in challenge the award of contract by respondent No. 1, Food Corporation of India in favour of respondent No. 4 Co-operative Society. The case of the petitioners is that 4th respondent society is brought into existence by Sri Gangadhar who was the handling and transport contractor of the F.C.I. godowns in and around Hubli during the year 1993. It is the case of the petitioners that the 4th respondent society is in substance controlled by Gangadhar, the excontractor, who has been brought into picture by backdoor by being awarded the contract after abolition of the contract labour system at Hubali godown. Petitioners contended that as per the policy decision taken by the first respondent Corporation pursuant to the Circular dated 19-1-1989 'at Annexure-A and the clarificatory Circular at Annexure-B dated 16-3-1989, the workers actually working at the godown were required to be awarded with the contract through the co-operative society formed by them and any co-operative society controlled by the erstwhile contractor was ineligible to be awarded such a contract. Therefore, awarding contract to respondent No. 4 is patently illegal.
18. It is further contended by the petitioners that in Hubli area Food Corporation of India had two godowns till the year 1988, one at Hubli-Dharwad road and the other was in a rented premises at Unkal. The Food Corporation of India had closed the rented godown at Unkai in the year 1988 and has constructed its own additional building at Bommapura 4 k.ms. from Hubli Railway Station. The workers at F.C.I. godown, Unkal came to work in the FCI godown at Hubli-Dharwad main road along with other loading and unloading workers. Petitionersfurther allege that handling and transport work at Hubli Dharwar road godown is being handled by the petitioners society since 1-4-1992 and its term is to continue till 31 -3-1994. That the workers who are working in the godowns are entirely members of not only the 1st petitioner society but also of the II petitioner Union. That this contract was awarded to the petitioner No. 1 Society pursuant to Annexure-A and B since the first petitioner society had been organised for the benefits of the loading and unloading workers in FC1 and fulfilled all their requirements in Annexure-A and B. It is their further case that the first petitioner society is also carrying on handling and transport work in all the godowns and railheads around Bangalore since 1-9-1991 to the utmost satisfaction of all concerned.
19. That the Food Corporation of India invited tenders for appointment of contractors for loading, unloading, handling and transport work at Bommapura (Hubli) under Tender Notice dated 26-3-1993. Since the first petitioner society is already handling the H. & T. contract in FCI godowns in Hubli and since the additional FCI godown at Bommapur is situated at a distance of 4 kms. from Hubli Railway Station and within a radius of 20 kms. from the Railway Station, the first petitioner society offered its quotation in response to the Tender Notice of the FCI. Petitioner No. 1 society quoted 136% above the Schedule of rate for services, given by the FCI in Appendix-VIII to the Tender Form. The II Respondent in response to the tender-given by the first petitioner society wrote a letter on 23-4-1993 and called upon the first petitioner society to furnish a list of local labourers to be enrolled as members of the said society. The said information was immediately furnished to the II Respondent.
20. It is the further case of the petitioners that on 15-4-1993 at about 2.30 p.m. the tenders received by the respondents were opened. It was found that the quotation of the first petitioner society at 136% above the schedule of rates, was the lowest. The 4th respondent had quoted 165% above the schedule of rates in its tender. Petitioners,therefore, contended that in all fairness respondents I to 3 should have awarded contract to the petitioners' society not only because the rates quoted by it were the lowest, but also because of the fact that it would fulfil requirements of Annexure-A and B. It is further contended that instead of awarding contract to petitioner society, respondents 2 and 3 called for negotiation only the 4th respondent even though it had quoted higher percentage of rates than the petitioner society. According to the petitioner's society, this was done with the sole ulterior object of avoiding awarding of contract to the petitioner society and bringing the Ex-contractor, who controlled 4th respondent society by the back-door as the 4th respondent society was promoted by Sri Gangadhar, who was the handling and transport contractor for FCI godown at Hubli. It is, therefore, submitted that the award of contract to 4th respondent by the respondents 1 to 3 is clearly arbitrary and voilative of Art. 14 of the Constitution of India. It is also based on the extraneous consideration namely, recommendation by the Asstt. Registrar of Co-operative Societies in favour of respondent No. 4. Tt is contended that when 4th respondent does not qualify for the awarding of contract as per the policy decision Annexure-A and B, contract is given to it in a discriminatory manner and therefore, the said awarding of the contract is illegal. Respondents 1 to 3 are not at all justified in flouting the directions of the FCI as per Annexure-A and B. It is, therefore, prayed that suitable directions be issued to respondents I to 3 to award contract for loading, unloading, handling and transport work at the additional FCI godown at Bommapur in Hubli, Dharwar District pursuant to the tender notice dated 26-3-1993 to the petitioner No. 1 society as its rates are the lowest and further directing them not to award contract to the 4th respondent as loading, unloading, handling and transport contractor at the said godown so long as the 4th respondent does not fulfil the requirement of Annexure-A and B.
21. These petitions are vehemently opposed by learned counsel for respondents 1 to 3 as well as by learned counsel for respondentNo. 4 contractor. Sri Narayanarao, learned senior counsel for respondents 1 to 3 has submitted that Bommapur godown being a new godown will not be covered by the letters of the policy decision of Annexure-A and B though the Corporation has tried to follow the spirit of directive policy in awarding contract for that godown. That the petitioner society does not have membership of local workers at Bommapur as it is functioning at Bangalore, while 4th respondent society is a local society of workers in the area and it was recommended by the Asstt. Registrar of Cooperative Societies for being awarded the contract. That tender wsa issued with a view to find out the market rate of handling and transport work and as the 4th respondent was more qualified to be awarded the contract, the contract was awarded to it by further negotiations as there was no need to call the petitioner No. 1 society for further negotiation as it had no membership of local workers.
22. The learned counsel for respondent No. 4, on the other hand, also supported the said contentions and further submitted that Annexure-A and B are merely administrative guidelines and even if it is assumed that they are binding on respondent Nos. 1 to 3, there was nothing arbitrary in respondent Nos. 1 to 3 awarding contract to respondent No. 4, which had membership of local workers, while the petitioner No. 1 was functioning at Bangalore and was not having membership of local workers. Mr. P. V. Shetty learned counsel for respondent No. 4 further submitted that as the petitioner society was not found suitable, counter offer could be given to respondent No. 4 and that respondents 1 to 3 were not bound to accept the lowest offer of the petitioner No. 1 society. In support of this contention, he invited our attention to various decisions of the Supreme Court, to which we will make a reference hereafter. It was further contended the respondent No. 4 society is the only society whose members are locally based. This is not the case with members of petitioner No. 1 society. Placing reliance on Clause 10 of the Tender notice, it was submitted that it is open to the F.C.I. to reject any tender and that petitioner No. I society has no statutory rightof getting its tender accepted. It was submitted that there was nothing arbitrary or irrational in awarding contract to respondent No. 4 society, which was better qualified for being awarded the contract.
23. In the light of the aforesaid rival contentions, following points arise for our determination:
1. Whether calling for tenders by the FCI for awarding contract for handling and transport work at KGF and Bangarpet godowns in Kolar District and at Bommapur godown at Hubli in Dharwar District is unauthorised and illegal being contrary to policy decision at Annexure-A and B?
2. Whether awarding of contract to respondent No. 4 so far as KGF and Bangarpetgodowns in Kolar District is violative of Art. 14 of the Constitution of India?
3. Whether awarding of contract by respondents 1 to 3 to respondent No. 4 for handling and transport of foodgrains in Bommapur at Hubli in Dharwar District is violative of Art. 14 of Constitution of India?
4. To what reliefs, if any, the petitioners are entitled to?
Point No. 1 :--
24. It may be noted that for the nature of work which the F.C.I. is entrusted with under the Statute, handling and transport of food-grains is a very vital function and it requires to be discharged by the Corporation almost all year round. For that work earlier they used to engage private contractors who would bring their own labourers for carrying on this work on behalf of the Corporation. The contractor would be paid in lump sum the contracted amount depending upon the extent of the work which he has to carry out through his labourers and labourers in turn would be paid on piece-rate basis. But even prior to such a system being adopted the F.C.I. in most of its godowns used to directly employ labourers on piece-rate basis for doing this vital work. Subsequently they switched over to contract labour system and this aspect of the matter was considered by the Supreme Court, : (1985)IILLJ4SC in the case of the Workmen of theFood Corporation of India v. M/s. Food Corporation of India, supra. Dealing with this historical aspect with special reference to Siliguri Depot Godown, Desai, J., speaking for the Supreme Court Bench had made pertinent observations. The decision of the Tribunal was reversed by the Supreme Court and it was held as under (Paras 13 and 15 of AIR) :--
'(1) that the abolition of the contract system and the introduction of direct payment system brought about a basic qualitative change in the relationship between the Corporation and the workmen engaged for handling foodgrains. On the disappearance of the intermediary contractor, a direct relationship of master and servant came into existence between the Corporation and the workmen.
(2) that any termination of service contrary to the provisions of the Standing Orders and the provisions of the I.D. Act, 1947 would be void. When workmen working under an employer were told that they had ceased to be the workmen of that employer, and had become workmen of another employer namely, the contractor in this case, in legal parlance such an act of the first employer constituted discharge, termination of service or retrenchment by whatsoever name called and a fresh employment by another employer namely, the contractor. If the termination of service by the first employer was contrary to the well established legal position, the effect of the employment by the second employer was wholly irrelevant. The action of the corporation in introducing a contractor so as to displace the contract of service between the Corporation and the workmen would be illegal and invalid and ab initio void. When once such workmen became the workmen of the Corporation it was not open to the Corporation to induct a contractor and treat its workmen as workmen of the contractor.'
25. It is also now well settled that contract labour system in case of work which is of perennial nature is frowned upon and is treated to be archaic. A latter Bench of Supreme Court consisting of M. N. Venkatachaliah and Kuldip Singh, JJ. in the case ofSankar Mukherjee v. Union of India, had to consider the question of abolition of contract labour system in connection with the jobs of loading and unloading of bricks from trucks and wagons for the bricks Department of Iron and Steel Company. It laid down that the purchase of bricks, transportation to the factory, unloading, stacking and use in the furnace are the jobs in one continuing process and it is difficult to say that these jobs are not incidental or allied to each other and that it cannot be said that loader's job is not, and other jobs in the Brick Department are, of perennial nature. Such type of contract was governed by the contract labour system but was under the direct control of the company and the contract system in connection with such work was required to be abolished. The Court speaking- through Kuldip Singh, J. in connection with the public sector undertaking made the following observation (at p. 534 of AIR):
'6. It is surprising that more than forty years after the independence the practice of employing labour through contractors by big companies including public sector companies is still being accepted as a normal feature of labour-employment. There is no security of service to the workmen and their wages are far below than that of the regular workmen of the company. This Court in Standard-Vacuum Refining Co. of India Ltd. v. Its Workmen : (1960)IILLJ238SC and Catering Cleaners of Southern Railway v. Union of India : (1987)ILLJ345SC has disapproved the system of contract labour holding it to be 'archaic', 'primitive' and of 'baneful nature'. The system, which is nothing but an improved version of bounded-labour, is sought to be abolished by the Act. The Act is an important piece of social legislation for the welfare of labourers and has to be liberally construed.'
26. Presumably taking a hint from the aforesaid decision of Supreme Court rendered in the FCI case and also keeping in view perennial nature of work of loading, unload-ing, handling and transporting of food grains at various godowns run by F.C.I. throughout India and being also a public sector under-taking charged with public duty and catering to public interest, the respondent-1 Corporation took a policy decision in 1989 to abolish contract labour system for handling food-grains and for loading and unloading them at its various godowns in India and instead decided to offer guaranteed employment of perennial and regular nature to the erstwhile workmen of the then existing contractors by engaging Labour Co-operative of such workmen and assuring them perennial nature of employment in such work. This policy decision is reflected by annexures 'A' and 'B' to the petitions to which we have made brief reference earlier. It would be preferable to extract these annexures in extent so as the fate of those proceedings revolves round the correct appreciation of the policy projected by these communications.
'Annexure--A: 19-1-1989
The Department of Food has desired that Contract Labour System in FCI., depots may be replaced by forming Labour Co-operative Societies and entrusting the work to those Societies in a phased manner. This change has to be brought out within a period of three months, and it has been desired that the progress may be intimated in the first week of February, 1989.
It has therefore, been decided that the following action should be taken by all the SRMs RMs/JM(PO)s :--
i) Senior Officers should visit all the Depots, talk to the labourers working at the Depot, help them in forming the Labour Cooperative Societies and getting it registered with the appropriate State Authorities.
ii) List containing the names, age etc., of labourers working under the contract system should be prepared and all of them enlisted as the member of Labour Co-operative.
iii) They should be helped in obtaining the licence etc., required under the provision of Contract Labour (R. & A.) Act, 1970.
iv) As and when the existing contract expire the next contract should be awarded only to the Labour Co-operatives, if the Societies have the capacity to undertake thework.
v) These Labour Co-op. Societies should also be encouraged to take composite H & T contracts as far as possible.
An action plan should be drawn in each Region in respect of each Godown depot where contractor has been engaged for H & T jobs, with reference to the date of expiry of the subsisting contract indicating the target dates for specific action and also by which date the Labour Co-op. Societies would be formed in various depots. The progress should be regularly reviewed every fortnight by SRMs JM(PO)s and should also be intimated to concerned Zo/ HOs every month as to reach by the 7th of the proceeding months giving the position upto the end of previous month.
4. The Compliance of these instructions should be strictly enforced by SRMsIM (PQ)'.
'Annexure : B -- 16-3-1989--
Please refer to Circular No. 1/63/89/Cont. dated 19th January, 1989 issued from file of even number on the subject mentioned above.
The Corporation has to actively participate in the formation of these societies by lending a helping hand in order to implement the Policy of sponsoring Co-operative and replace the contract system in FCI in phased manner despite problems that are likely to arise in the course of implementing the objective.
In order to encourage the formation of Labour Co-operative Societies it has since been decided to allow the following additional concessions in addition to those already allowed to those societies in accordance with Hqrs, Circular No. F.1/12/30-Cont. dated 25-5-1981.
1. Extend assistance in the form of Monetary subsidy for paying to the staff of the co-operatives on standard scale, lapsed over for a period of three years, 100% in the first year, 50% in the second year and 25% in the 3rd year and 'NIL' from the forth year.
2. Extend assistance in the form of accommodation and furniture for the officeof the co-operative societies on a standard scale.
3. Provide furniture and utencils for the canteens to be run by the Labour Cooperative Societies.
However, for operational reasons it is desirable that there should be only one Labour Co-operative Godown complex.
Such Labour Co-operative Societies formed be awarded contracts without calling for the tenders and on the basis of current market rates.'
27. We may mention at this stage that learned Counsel Sri Shetty appearing for Respondent-4 in Hubli group submitted that these are mere, executive instructions, the breach whereof would be of no consequence. However, learned senior counsel for Respondents-1 to 3, and in our view rightly took up the stand that there is clear-cut policy laid-down by Annexure-A and B and the F.C.I. has to consistently follow this policy. In our view once a policy decision is taken by a Public Sector Undertaking like Respondent-1 which is a 'State' within the meaning of Art. 12, any action on its part which deviates from such settled policy would render the action arbitrary, unauthorised, illegal and would also attract the rigors of Art. 14 of the 'Constitution of India.
28. Now, a mere look at Annexure-A and B clearly indicates that from January 1989, respondent-1 got wedded to clear-cut policy of abolishing of contract labour system of work that may be existing in its godowns at various places in India so far as work of loading, unloading and transporting of food grains was concerned and the workers of erstwhile contractors had to be dealt with no principal to principal basis and to be offered piece-rate work by encouraging them to form Labour Co-operative Societies of such erstwhile employees of ex-contractors. As we have seen above this policy is in consonance with the !aw declared by Supreme Court for the aforesaid decisions clearly deprecating the archaic policy of pursuing contract labour system in connection with such activities. Once this conclusion is reached the resultbecomes obvious. So far as KGF and Bangarpet matters are concerned earlier there was a contractor who was catering to this work on behalf of the F.C.I. through his hired labourers. Once that contract came to an end by June 1993, it was incumbent upon F.C.I. following policy decision at Annexure-A and B, to see to it that the erstwhile workers of the ex-contractor were offered and assured perennial nature of work and employment by being self-employed workmen constituting the co-operative society of their own, and that calling for tender was out of question for once again giving work on contract labour basis. Despite this clear-cut policy holding the field, it is surprising how the respondent No. 1 for these godowns in Kolar District, once again invited tenders, underwent exercise of scrutinising the tenders and attempted to find out best suitable charges offered by the concerned tenderer and to accept that contract. It is interesting to note that the tender notice calling for tenders required the tenderer to offer tender in the prescribed form. Such documents in the form of a book-let are produced on record by consent of parties. That clearly indicate that the said tender notice and the prescribed form in which the tenders were called for, for awarding further contract to a contractor under contract labour system from 1-7-1993 and ending with 30-6-1995 were clearly contrary to the settled policy of not pursuing such a course as reflected by policy decision Annexures A and B. We may briefly indicate what these tender documents reflected.
29. The very first page shows that tenderer should furnish full, precise and accurate details in respect of the information asked for in the Appendix II attached to the form of tender. The tenderers should also furnish the required information about their income-lax assessment, name, name of their bankers and also furnish income-tax clearance certificate. If the income-tax clearance certificate could not be attached with the tender, the Tenderers shall give a clear undertaking to furnish the Income-tax clearance certificate within a month from the date of submission of the tender or acceptance of the tender. The tenderers should also furnish thedetails of number of trucks owned by them and the registration of each truck in Appendix-11. At page 5 are found instructions to be followed by the persons submitting tenders. It is laid-down that the person or persons signing the Tender shall state in what capacity he is or they are signing the tender e.g., as a sole proprietor of a firm or as a secretary/Manager/ Director, etc., of a limited Company. In the case of partnership Firm, the names of all the partners should be disclosed and the tender shall be signed by all the partners or their duly constituted attorney having authority to bind all the partners in all matters pertaining to the contract. The original or an attested copy of the partnership deed should be furnished along with the tender. In case of a limited company the names of the Directors shall be mentioned and it shall be certified that the person signing the tender is empowered to do so on behalf of the Company. A copy of the Memorandum and Articles of Association of the company shall be attached to the tender. In the case of Hindu undivided family, the names of the family members should be disclosed and the karta who can bind the firm should sign the form and indicate his status below his signature.
30. At page-6 paragraph 6 is found another instruction in connection with the documents attached to tender. It provides that the Income-tax Clearance certificate and attested copies of partnership deed and power of attorney must be submitted by the tenders along with the tender. After a final decision about the tender is taken the successful tenderer shall produce original partnership deed and power of attorney within seven days of the acceptance of tender, failing which Corporation will be entitled to cancel the contract at the risk and cost of the tenderer. However, as regards, Income-tax clearance certificate if he is not in a position to attach it, an undertaking should be given stating that it would be furnished within 30 days from the date of submission of tender.
31. In page No. 7(c) are found the particulars of the documents to be attached to the tender namely, Partnership Firms shallfurnish individual income-tax clearance certificate relating to all the partners in addition to the certificate relating to the firms themselves. If however, the Income-tax Clearance Certificate cannot be furnished with the tender, the Tenderer must undertake to furnish them within 30 days from the date of submission of tender.
32. Instruction(d) lays down that in case of business concern, owned by Hindu Undivided family individual income-tax clearance certificate relating to each member of the family will not be necessary provided no member of the family is doing any independent business separately.
33. In case of the Karta of the family the requirements of such tender is laid at page 7 of book-let by way of various instructions contained in paragraph mentioned therein. It is pertinent to note that condition (1) says that the tenderer should submit a copy of the licence obtained from the appropriate authority under the contract labour (R & A) Act, 1970 along with the tender. However, in case of a new entrants, he should give an undertaking to submit the certificate of licence within 30 days of award of contract failing which his conduct is liable for termination and alternate arrangements will be made at his risk & cost.
34. At page 10 paragraph-Ill are found particulars regarding parties to the contract. It is recited therein that the parties to the contract are contractors and the Food Corporation of India represented by the Senior Regional Manager and or any other person authorised and acting on his behalf. It is further laid down that the person signing the tender or any other documents forming part of the tender on behalf of any other person or a firm shall be deemed to warrant that he has authority to bind such other person or the firm as the case may be, in such matter pertaining to the contract.
35. At paragraph-IV, Constitution of Contractors is laid-down and is provided thatthe Contractor shall at the time of submission of tender declares whether they are sole proprietary concern or Registered Partner-ship firm or private limited company or a Public Limited Company incorporated in India or a Hindu Undivided Firm. The composition of the partnership names of Directors of Company and the name of the Karta of Hindu Undivided Family shall also be indicated. The contractors shall also nominate a person in whose hands the active management and control of the work relating to the contract during the tenure of the contract would lie. It is further provided that the contractor shall not during the currency of the contract, make without the prior approval of the corporation any change in the constitution of the firm. Then follows page-11 wherein a provision regarding liability for personnel, is made in paragraph-VII of tender document. It recites that; All persons employed by the contractors shall be engaged by them as their own employees/ workers in all respects and the responsibility under the Indian Factors. Act or the Workmen's Compensation Act or Employees Provident Fund Act, or any other similar enactments in respect of all such personnel shall be that of the contractors. The contractors shall be bound to indemnify the Corporation against all claims whatsoever in respect of the said personnel under the Workmen's Compensation Act 1923 or any statutory modification thereof or otherwise in respect of any damage or compensation payable in consequence of any accident or injury sustained by any workman or other person whether in employment of the contractors or not.
36. The contractors shall be liable for making contribution in accordance with the provisions of the Employees Provident Fund/ Miscellaneous Act 1952 and the scheme framed thereunder in respect of the labour employed by him. The contractor shall recover the amount payable by such employees and pay to the Corporation i.e., the Principal employer under the said Act, the amount of members contribution together with an equal amount of his contribution. If on account of the default of the contractor in making such payments or for any other reasons, the corporation makes such contributions on behalf of the contractor, the contractor shall be bound to reimburse thecorporation the amount of such contribution made by it. The Corporation shall be entitled to set off against the amounts due to the Contractor the contributions made by it on account of his defaults in making payments or otherwise in respect of the labour employed by the contractor.
37. The Contractor shall also maintain such record and also submit such returns as may be Prescribed under the Act to the authority designated in the E. P.F./M.P. Act, 1952 and the scheme framed thereunder and the Sr. Regional Manager, Food Corporation of India. The contractor shall also make available such records and returns as may be prescribed and/or demanded for inspection to the officers of the Regional Provident Fund Commissioner and to the Senior Regional Manager, Food Corporation of India or an officer authorised by him or acting on his behalf.
38. At page-12 is found a provision regarding payment of wages to workers and other provisions in connection with the workers. It reads as under:
'(i) Payment of Wages of Workers:
The contractors shall pay not less than minimum wages to the workers engaged by them on either time rate basis or piece rate basis on the work. Minimum wages both for the time rate and for the piece rate work shall mean the rate(s) notified by the Appropriate Authority from time to time where such wages have not been so notified by the appropriate authority, the wages prescribed by the Sr. Regional manager as minimum wage should be applicable. The Contractor shall maintain necessary records and registers like wage book and wage slip etc., register of unpaid wages and Register of Fines and Deductions giving the particulars as indicated in Appendix-VI(A). The minimum wages prescribed for the time being for piece rate and time rate workers are as indicated below:
1. Time rate workers ..Rs. 5.50(Male) (Rs.five & ps,Fifty only)2. Time rates workers .. __do__(Female)3. Piece rate workers .. __do__(ii) Weekly off:
The contractors shall allow or cause to be allowed to the workers directly or indirectly employed in the work one day's rest for six days continuous work and pay wages at the same rate as for duty.
(iii) Attendance Allowance:
The contractors shall pay attendance allowance @ Rs. 1.00 (Rs. one only) per day to the regular workers generally employed by him on piece rate or time rate basis when such workers report for duty on the day it is not booked or given work for the day shift.
Aforesaid wage/benefit at Clause-VII (d)(i) to (iii) shall be deemed to be a part of this contract and any contravention thereof shall be deemed to be breach of this contract. The Sr. Regional Manager shall have the right to deduct from money due to the contractor any sum required for making good the loss suffered by a worker or workers by reasons of non fulfillment of the conditions of the contract for the benefit of the workers, nonpayment of wages or deductions made from his or their wages which are not justified or non observance of the Regulations Enactments mentioned in Clause-VII (a).'
'1. Canteen: (i) Under Section 16 of the contract Labour (Regulation and Abolition) Act 1970 the contractor shall provide within 60 days from the commencement of the employment of contract labour or where the employment of contract labour is likely to continue for six months and wherein contract labour numbering one hundred or more are employed an adequate canteen.
(ii) If the contractor fails to provide the canteen within the time laid down in para (i) the same shall be provided by the Principal Employer. All expenses incurred by the Principal Employer in providing this amenity shall be recovered by the Principal Employer from the contractor either from the admitted bills submitted by the contractor from time to time or shall be treated as a debt payable by the contractor.
(iii) The canteen shall be maintained by the contractor in accordance with the provisionsof the relevant laws, Rules and Regulations.
(iv) The foodstuffs and other eatables to be served in canteen shall be in comformity with the normal habits of the contract Labour.
(v) The charges for foodstuffs, beverages and other eatables served in the canteen shall be based on no profit no loss and shall be conspicuously displayed in the canteen.
(vi) In arriving at the prices of foodstuffs, and other articles served in the canteen the following items shall not be taken into consideration as expenditure viz.,
a) The rent for land and building.
b) The depreciation and maintenance charges for the buildings and equipments including furniture, crockery, cutlery and utencils.
c) The water charges and other charges incurred for lighting and ventilation.
d) The interest on the amount spent on the provision and maintenance of furniture and equipment provided in the canteen.
(vii) The books of accounts and Registers and other documents used in connection with the running of the canteen shall be produced on demand for inspection.
(viii) The accounts pertaining to the canteen shall be audited once in every 12 months by Registered Accountants & Auditors.
Provided that the Chief Labour Commissioner (Central) or an officer authorised by the appropriate Government may approve any other person to audit the accounts, if he is satisfied that it is not feasible to appoint a Registered Accountant and Auditor or in view of the site or location of the canteen.'
39. At page 14 of the book-let is found provisions regarding Latrines and Urinals and it is laid down as under:
'1) Under Section 18 of the Contract Labour (Regulation and Abolition) Act, 1970, it shall be the duty of the Contractor to provide adequate number of latrines so that
(a) Where females are employed, there shallbe at least one latrine for every 25 females;
(b) Where males are employed, there shall be at least one latrine for every 25 males.
Provided that where the number of males or females exceeds 100, it shall be sufficient if there is one latrine for every 25 males or females up to the first 100 and for every 50 thereafter.
(ii) Every latrine shall be under cover and so partitioned off so as to secure privacy and shall have proper doors and fasterings.
(iii) Where workers of both sexes shall be employed, there shall be displayed outside each block of latrine and urinals a notice in language understood by majority of workers 'For Men only' and 'For Women only' bearing the figures of a Man and a Woman as the case may be.
(iv) There shall be at least one urinal for male workers up to 50 and one for female workers up to 50 at a time.
Provided that where the number of males or females exceeds 500, there should be one urinal for every 50 males or females upto the first 500 and one for every 100 or part thereof thereafter.
(v)(i) The Latrines and urinals shall be conveniently situated and accessible to workers at all times.
(ii) The inside walls shall be constructed of masonry or some suitable heat resisting non-absorbent materials and shall be cement washed inside and outside atleast once a year. The dates of cement washing shall be noted in the register maintained for the purpose and kept available for inspection. Latrines and urinals other than those connected with a flush sewage system shall comply with the requirements of the public Health Authorities,
(iii) Water shall be provided by means of a tap or otherwise so as to be conveniently accessible in or near the latrines and urinals.'
40. At page 15 is found the provision regarding First-Aid facilities, it provides as under;
'5. (i) The contractor shall provide and maintain readily available first-aid boxes during all the working hours at the rate of not less than one box for 150 contract labour orpart thereof.
(ii) The first-aid box shall be distinctively marked with a red cross on a white ground and shall maintain the equipments as provided for in the Contract Labour (Regulation and Abolition) Act of the appropriate Government.
(iii) Adequate arrangements should be made for immediate recoupment of the equipment whenever necessary.
6. If the amenity is not arranged by the contractor within thirty days from the commencement of the contract labour, the same shall be provided by the Principal Employer after the expiry of the said period and the expenses incurred shall be either deducted from the admitted bills of the contractor or treated as debt payable by the contractor.'
41. At page 29 of the Book-let is found under the caption duties and responsibilities of the Contractors. That the contractor shall engage competent and adequate staff and labour to the satisfaction of the Senior Regional Manager and that the Contractor shall be responsible for good conduct of their employees and shall compensate the corporation for losses arising from negligence, carelessness, want of skill or misconduct of themselves, their servants or agents or representatives. Direction No. 7 lays down that the contractor shall ensure that their labour do not use large hooks for handling f oodgrain bags or any hook for handling flour, sugar and fertiliser bags at any stage. In Appendix II to the tender form found at page 37 of the book-let, various details to be filled by the tenderer are mentioned. Amongst them at paragraph No. 2 are found details regarding composition of tenderer, whether tenderer is Hindu Joint Family business, proprietorship concern or Registered partnership Firm or a limited company. It also requires furnishing the names and date of birth of all the partners/directors/proprietors/Karta ofJoint Family. It has to be certified that there are no undisclosed partners and in the case of limited companies, the authorised and paid up capital should be stated. At page 39 is found Appendix-III, which deals with Income-tax Clearance Certificate and provides for name and style of the Company, Firm, HUF or individual assessed or assessable to Income-tax. At page 45 are found instructions for completion of Income-tax Clearance Certificate and also the details regarding submission of Contract Labour Licence being one of the documents attached to the tender. In Appendix-VII at page 62 of the book-let are found the required details regarding wage book and wage slips etc. It has been laid down that the contractor shall maintain a wage book of each worker in such form as may be convenient and shall include the following particulars:
(a) Name of worker;
(b) Rate of daily or monthly wage;
(c) Nature of work on which employed;
(d) Total number of days worked during each wage period.
It has also been laid down therein that the contractor shall also issue wage slip containing the aforesaid particulars to each worker employed by him, at least a day prior to the day of disbursement.
42. The aforesaid details required to be filled in by tenderers pursuant to the tender notice in question, leave no room for doubt that despite a clear-cut policy laid down by the Food Corporation of India, as per Annexures A and B, the tenders were called for from members of general public to offer themselves as contractors for carrying on the contract labour work in the concerned godowns and the workers were to be their employees. Thus, the action of the respondents 1 to 3 in resorting to invitation of such tenders for entrusting the Contract Labour work of handling and loading and unloading of foodgrains at the concerned depots and godowns was clearly violative of the policy laid down by the Corporation itself as per Annexures A and B, and was an impermissible exercise.
43. Learned counsel for the respondent No. 4 vehemently contended that it is not the case of the petitioners that such tenders should not have been invited despite the policy decision taken as per Annexures A and B and that on the contrary they themselves have also filled in the tenders purusuant to the tender notice. Hence, they cannot blow hot and cold and cannot challenge the very action of calling tenders when their tenders were not accepted. It is not possible to agree. It has been averred in paragraph 16 of the Writ Petition Nos. 19907-908/93 that the respondents 1 to 3 are not at all justified in flouting the directives of the Food Corporation of India under Annexures A and B. Similarly, in the Writ Petition Nos. 19921-22/93, similar averment is found in paragraph 15. It must be kept in view that it is not the case of the respondent-Corporation that the policy decision taken as per Annexures A and B is at any time withheld or rescinded. On the contrary, it is their case that the said policy still holds the field. If that is so, it is difficult to appreciate how the respondents could have again resorted to calling for tenders for giving contract to independent contractors for carrying on handling and loading and unloading work of foodgrains at Kolar Gold Field and Bangarpet depots in Kolar District, through such independent contractor's employees.
44. It is also pertinent to note that once Contract Labour System was abolished for such work as per the policy decision, as per Annexures A and B, and once the existing contractors were to be eliminated, the same existing contractor who was the President of respondent No. 4 Society, could not have been brought back by back-door and awarded the contract. In Writ Petition Nos. 19907 and 19908/ 93 dealing with Hubli group, it has been clearly averred in para 10 of the petition that awarding of contract to respondent No. 4 is done with the sole ulterior object of avoiding awarding of contract to the first petitioner-society and to favour unduly the 4th respondent society promoted by Sri Gangadhar, who was the H & T Contractor for F.C.I. godown in Hubli. In the objections filed by respondent No. 4 society, at para No. 11, in connection with this aspect, it hasbeen averred as under:
'It is true that the said K. Gangadhar has taken active participation in the formation and incorporation of this respondent society to help its unemployed members. His experience as Handling and Transport contractor is being utilised by the society and its members for their benefit. Since this respondent is a co-operative society, the benefits of the contract would enure to all members of the society ........... This respondent is notformed for the benefit of the said K. Gangadhar though he is the President of this respondent society.'
45. So far as Writ Petition Nos. 19921-22/93 dealing with Kolar District depots are concerned in para 9 of the petition, it has been averred that the award of contract to respondent No. 4 is done with the sole ulterior object of avoiding awarding of Contract to the First petitioner society and to favour unduly to the 4th respondent society promoted by Sri Mukuthar Ahmed, Ex. F.C.I. Contractor. So far as these averments are concerned, respondent No. 4 society in the statement of objections nowhere denied the fact that Sri Mukuthar Ahmed is its President. On the contrary, the said Mukuthar Ahmed has filed his affidavit verifying the statement of objections and he has stated that he is President of Kolar Gold Field Labour and Transport Contract Co-operative Society Limited and that he is the 4th respondent in the petition, meaning thereby that he accepts the fact that he is at the helm of the affairs of the 4th respondent-society. These facts, clearly show that it is not in dispute that respondent No. 4 societies in all these petitions have been presided over and have been controlled by the Ex-Contractors. Awarding of contracts to them would necessarily bring these Ex-Contractors once again in picture by backdoor and would amount to giving them a second innings when they are to be totally excluded as per the policy decision Annex-ures A and B. In fact, Labour Co-operative Society controlled by the erstwhile contractor namely, Mukuthar Ahmad, in case of Kolar Gold Field and Bangarpet Depots in Kolar District and Gangadhar in case of Hublidepots were clearly ineligible for being consi-dered for award of contracts when Contract Labour System was sought to be abolished on I the policy decision taken as per Annexur.es A and B. Awarding contract to them amounted to reintroducing the Contract Labour System j for such work, by in substance granting the contracts to ex-contractors through respondent-4 societies in both these cases, when they were controlled by erstwhile contractors. It was like putting old wine in new bottles.
46. The contention of the learned counsel for respondent No. 4 in these petitions that the contractors were good Samaritans and were trying to help out the erstwhile labourers, cannot stand any scrutiny for the obvious reason that once the contractors were to be eliminated under the policy Annexure A and B, the same contractors under the guise of being Presidents of Labour Co-operative Societies of their workmen could not have a second innings by again coming on the scene and carrying on the very same activities as contractors engaging conn act labour, which would remain exploited as earlier and which exploitation was to be put to an end as per policy decisions at Annexures A and B. Thus award of contracts to respondent No. 4 amounted to resurrection of the ghost of Draculla i.e., contract labour system through independent contractors, which was sought to be laid to rest as per Annexures A and B years back in 1989. The various clauses of the tender form to which we have referred in details earlier, leave no room for doubt that the very Contract Labour System was sought to be resorted to by respondents I to 3 at the godown in Kolar District and at Hubli in Dharwad District, totally ignoring and flouting the policy to the contrary laid down at Annexures A and B. Whether the authorities under the Co-operative Society Act, can deal with an erring President of a co-operative society or not, is totally besides the point.
47. It is also not possible to agree with the contention of learned counsel for respondents 1 to 3 that old tender forms were utilised by mistake and that the only purpose of calling for tenders was to ascertain the market rate of labour for such work. This argument cannotstand scrutiny for the simple reason that for ascertaining market rate of labour, the simplest method was to find out as to at what rate the erstwhile workmen were offering their services and whether they were willing to offer the very services at the same rate or it could have been found out by ascertainment of such rates from open market in case of other employees being engaged in similarly situated activities in the locality.
48. The contention of the learned counsel for respondents 1 to 3 that the policy decision as per Annexures A and B, does not apply in letter to Bommapur godown though it applied in spirit also cannot be of any avail to the respondent-Corporation, for the simple reason that once it is conceded that the, spirit of the policy underlying in Annexures A and B will have to be applied even for new godowns, it is difficult to appreciate how the contract system can be re-introduced by calling for tender and by giving contract to the erstwhile contractor who controls a Labour Co-operative Society consisting of erstwhile workmen or even other local workmen who are ready to carry out the work of handling, loading and unloading and transporting of foodgrains. Even otherwise, it is easy to appreciate that the Corporation being a State under Art. 12, cannot have a different yardstick for new godowns as compared to a yardstick applicable for old godowns and cannot resort to Contract Labour System for new godowns when the nature of the work is the same and when there is a uniform policy adopted by the Food Corporation of India for all the godowns in India wherever situated that there shall not he any Contract Labour System prevalent in these godowns and that independent contractors as middlemen shall be eliminated. Even assuming that the spirit of Annexures A and B applies to the new godown at Hubli as contended by the learned counsel for respondents I and 3, even that has not been observed as tenders are invited for giving contract for the work in question and the Contract Labour System is sought to be introduced and an erstwhile contractor is given the contract wherein he will fully control the work as President of respondent No. 4 co-operative society. It must, therefore,be held that there is no escape from the conclusion that Food Coropration of India had no legal justification for calling for tenders for awarding contracts for handling and transport work at K.G.F. and Bangarpet godowns in Kolar District and at Bommapur godown near Hubli in Dharwad District.
49. Point No. 1 will, therefore, have to be answered in favour of the petitioners and against the respondents.
POINT NOS. 2 and 3:
50. Our answer to Point No. 1 would put an end to the proceedings and would entitle the petitioners to succeed and the award of contracts to respondent No. 4 in all these cases will have to be quashed and set aside. Still however to give completeness to our judgment and on an assumption that action of calling for such tenders by the F.C.I. was justified, it becomes necessary for us to consider Points Nos. 2 and 3 on merits.
51. Before we turn to the facts of these cases, with a view to finding out whether action of respondents 1 to 3 in awarding contractors to respondent No. 4 society in Kolar and Hubli group matters stands the testing of Art. 14, it will be necessary to briefly refer to the settled legal position in the light of which this question will have to be examined. We shall refer to various decisions to which our attention was invited by the learned counsel appearing for the parties.
52. As we have seen earlier, respondent No. 1 is a statutory corporation governed by the sweep of Art. 12 of the Constitution of India. Its actions therefore wilt have to be judged on the touch-stone of Art. 14 of the Constitution.
53. Learned Senior Counsel for petitioners invited our attention to the latest decision of the Supreme Court in : AIR1996SC51 , in Sterling Computers Ltd. v. M/s. M. and N. Publications Ltd. In that case, a Division Bench of the Supreme Court consisting of Kasliwal and Singh, JJ. had to consider the legality of administrative action of awarding contracts, for publication of telephone directories. Theauthorities without calling fresh tenders had entered into a supplemental agreement with fresh terms and conditions in favour of the appellant before the Supreme Court. That supplement agreement was held to be void being in contravention of the mandate of Art. 14. In this connection the following pertinent observations were made by N.P. Singh, J., speaking for the Suprme Court (Paras 17, 19 and 20 of AIR SCW).
'It is true that by way of judicial review the court is not expected to act as a court of appeal while examining an administrative decision and to record a finding whether such decision could have been taken otherwise in the facts and circumstances of the case. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the 'decision making process'..... By way ofjudicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans (1982 (3) All ER 141) (supra), the Courts can certainly examine whether 'decision making process' was reasonable, rational, not arbitrary and violative of Art. 14 of the Constitution.
If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Art. 14 of the Constitution, the Courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court amounts to encroachment on theexclusive right of the executive to take such decision.'
54. In the case of Kumari Shrilekha Vidyarthi etc. etc. v. State of U.P., reported in : AIR1991SC537 , the Supreme Court was concerned with the legality of action of State of U.P. terminating the services of Government counsel at a stroke holding that a public element was involved in the appointment of Government Counsel. The following pertinent observations were made for judging such action on the touch stone of Art. 14 of the Constitution. Verma, J., speaking for Supreme Court in that case laid down as under:
'Even apart from the premise that the 'office' or 'post' of D.G.C.S. has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Art. 14 this power is available even without that element on the premise that after the initial appointment, the matter is purely contractual. The personality of the State, requiring regulation of its conduct in all spheres by requirements of Art. 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Art. 14 and contractual obligations are alien concepts, which cannot co-exist. The Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. Exclusion of Art. 14 in contractual matters is not permissible in constitutional scheme. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Art. 14 and permit judicial review, it can be said that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. Thereforeit would be difficult and unrealistic to excludethe State actions in contractual matters afterthe contract has been made, from the purviewof judicial review to test its validity on theanvil of Art. 14. Thus the wide sweep ofArt. 14 undoubtedly takes within its fold theimpugned circular issued by the State of U.P.in exercise of its executive power, irrespectiveof the precise nature of appointment of theGovernment Counsel in the districts and theother rights, contractual or statutory, whichthe appointees may have.'
55. In the case of State of M.P. v. Nandlal Jaiswal, in : [1987]1SCR1 , the Supreme Court was concerned with the illegality grant of licence and manufacture of country liquor. It was held that even though there was no fundamental right of vending liquor with the citizen or for getting a grant of licence for the said purpose from the State Authorities, Art. 14 was applicable for judging the State action. Bhagwati, C.J., speaking for the Supreme Court, observed in this connection that (at p 279 of AIR):
'When the State decides to grant such right or privilege to others, the State cannot escape the rigour of Art. 14. It cannot act arbitrarily or at its sweet will. It must comply with the equality clause while granting the exclusive right or privilege of manufacturing or selling liquor.'
It has further observed that (at p 279 of AIR):
'The Slate cannot ride roughshod over the requirement that Article.'
It was further observed (at p 283 of AIR):
'When the State Government is granting licence for putting up a new industry, it is not at all necessary that it should advertise and invite offers for putting up such industry. The State Govt. is entitled to negotiate with those who have come up with an offer to set up such industry.'
56. We were also taken to the decision in the case of Shri Harminder Singh Arora v. Union of India, in : [1986]3SCR63 . In that case tenders were invited for supply of fresh buffalo and cow milk. The appellant who was eligible and had been supplying milk and wasalso on approved list submitted tender. The General Manager Govt. Milk Scheme filed tender but it was in respect of pasteurised milk and not fresh milk. The appellant's tender was the lowest but tender of Govt. Milk Scheme was accepted. Holding that such action of the authority was arbitrary, illegal and violative of Art. 14, it was observed that (at p (sic) of AIR):
'It is open to State to adopt a policy different from one in question. But if the authority qr the State Government chooses to invite tenders then it must abide by the result of the tender and cannot arbitrarily and capriciously accept the bid of respondent No. 4 although it was much higher and to the detriment of the State. The High Court, in our opinion, was not justified in dismissing the writ petition in limine by saying that the question relates to the contractual obligation and the policy decision cannot be termed as unfair or arbitrary. There was no question of any policy decision in the instant case. The contract of supply of milk was to be given to the lowest bidder under the terms of the tender notice and the appellant being the lowest bidder he should have been granted the contract to supply, especially when he has been doing so for the last so many years.'
57. Learned counsel for the petitioner invited our attention to decision of a learned single Judge of this Court, Chandrakantaraj Urs, J., in ILR (1986) 2 Kant 2339, (M/s. Jindal Aluminium Ltd. v. State of Karnataka, M/s. Associated Irrigation Equipment Co. (P) Ltd. v. Secretary, Industries and Commerce Department). The learned single Judge had to consider the question whether in awarding rate contracts in respect of Sprinkler Irrigation Equipment needed by its various departments of the State, the State had to follow precepts of Art. 14 and whether the State could ignore one of the tenderers and deal with the other tenderer behind the back of such ignored tenderer. Holding that such an action on the part of the State is clearly arbitrary and discriminatory in the realm of granting such contracts, Urs, J., placing reliance on well settled legal position in paras. 29 and 30 of the report held that;
29. 'the complaint of the 2nd of the petitioners that it was a victim of unfair procedure to a great extent must be upheld. There is no denying that it was not called upon to demonstrate. There is no denying that it made a joint representation protesting against the unfair procedure adopted in awarding the contract to Premier Irrigation Equipment Limted. There is no denying that the records do not disclose that any one other than the petitioner in the first of the petitions and the 3rd respondent were the only two who were invited to the conference on 26-6-1985.
30. This method of exclusion of a valid tender is grossly unfair in view of the decided cases by our own Supreme Court. In such circumstances it is a fit case made out for interference by the petitioner A.I.E.C. Pvt. Ltd. If there was no equality of treatment of the tenders, similarly placed persons have been dissimilarly treated. Therefore the entire exercise of the Government is violative of Art. 14 of the Constitution and in that view of the matter the contract awarded is liable to be set aside though for no fault of M/s. Premier Irrigation Equipment Ltd.'
58. Our attention was also invited by the learned counsel for the petitioners to : AIR1985SC1147 in the case of Ram and Shyam Company v. State of Haryana. In that case Supreme Court had to consider whether the action of the State in connection with the grant of quarry lease ignoring the highest bidder in auction whose bid was accepted by the Presiding Officer and granting the lease to another person who offered more money on. the order of Chief Minister could be justified on the touch-stone of Article 14 of the Constitution. In this connection D. A. Desai, J., speaking for Supreme Court made the following pertinent observations:
'Held, that a unilateral offer, secretly made, not correlated to any reserved price made by B after making false statement in the letter was accepted without giving any opportunity to A either to raise the bid or to point out the falsity of the allegations made by B in the letter as also the inadequcy of his bid. 'A' suffered and unfair treatment by the State in discharging its administrative functionsthereby violating the fundamental principle of fairplay in action. When he gave the highest bid, he could not have been expected to raise his own bid in the absence of a competitor. Acceptance of an offer secretly made and sought to be substantiated on the allegations without the verification of their truth, which was not undertaken, would certainly amount to arbitrary action in the matter of distribution of State largess which is impermissible.'
59. Lastly, our attention was invited by the learned counsel for the petitioners to the well known case of Ramana Dayaram Shetty v. The International Airport Authority of India, in that : (1979)IILLJ217SC case P.N. Bhagwati, J., as he then was, speaking for the Bench in the Supreme Court has to consider whether there was any illegality in granting of contract for running restaurant and snack bars at Bombay International Airport. It was held that when the tenders were called for running such Restaurants and snack bars, certain qualifications were laid down as requisite, tender of person who does not fulfil the requisite qualifications could not be accepted. In support of this view in paragraph 34 of the report it was laid down as under:
'It is, therefore, obvious that both having regard to the constitutional mandate of Art. 14 as also the judicially evolved rule of administrative law, the 1st respondent was not entitled to act arbitrarily in accepting the tender of the 4th respondents, but was bound to conform to the standard or form laid down in paragraph 1 of the notice inviting tenders which required that only a person running a registered IInd class hotel or restaurant and having at least 5 years' experience as such should be eligible to tender. It was not the contention of the appellant that this standard or norm prescribed by the 1 st respondent was discriminatory having no just or reasonable relation to the object of inviting tenders, namely, to award the contract to a sufficiently experienced person who would be able to run efficiently a IInd class restaurant at the airport. Admittedly the standard or norm was reasonable and nondiscriminatory and once such a standard or norm for running a IIndclass restaurant should be awarded was laid down, the 1st respondent was not entitled to depart from it and to award the contract to the 4th respondents who did not satisfy the condition of eligibility prescribed by the standard or norm. If there was no acceptable tender from a person who satisfied the condition of eligibility, the 1st respondent could have rejected the tenders and invited fresh tenders on the basis of a less stringent standard or norm, but it could not depart from the standard or norm prescribed by it and arbitrarily accept the tender of the 4th respondents. When the 1st respondent entertained the tender of the 4th respondents even though they did not have 5 years' experience of running a IInd class restaurant or hotel, it denied equality of opportunity to others similarly situate in the matter of tendering for the contract. There might have been many other person, in fact the appellant himself claimed to be one such person, who did not have 5 years' experience of running a IInd Class restaurant, but who were otherwise competent to run such a restaurant and they might also have competed with the 4th respondents for obtaining the contract, but they were precluded from doing so by the condition of eligibility requiring five years' experience. The action of the 1st respondent in accepting the tender of the 4th respondents, even though they did not satisfy the prescribed condition of eligibility, was clearly discriminatory, since it excluded other persons similarly situate from tendering for the contract and it was also arbitrary and without reason. The acceptance of the tender of the 4th respondents was, in the circumstances invalid as being violative of the equality clause of the Constitution as also of the rule of administrative law inhibiting arbitrary action.'
60. On the other hand learned counsel for respondents in support of their contentions invited our attention to certain decisions of the Supreme Court to which we will now make reference:
61. In case of Sachidanand Pandey v. State of West Bengal in : [1987]2SCR223 of the report at page 1113, it has beenobserved that when it is necessary to secure public interest, property could be sold by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. It is difficult to appreciate how this decision could be helpful to respondents on the facts of these cases because it was held by the Supreme Court that Government of West Bengal acted with probity in granting the lease of Begumbari land to the Taj Group of Hotels for the construction of a Five Star Hotel in Calcutta. The Government of West Bengal did not fail to take into account any relevant consideration. Its action was not against the interests of the Zoological Garden or against the best interests of the animal inmates of the zoo or migrant birds visiting the zoo. The financial interests of the State were in no way sacrificed either by not inviting tenders or holding a public auction or by adopting the 'net sales' method. On the peculiar aspects of that case, the aforesaid observations were made.
62. In the case of Daman Singh v. State of Punjab, : [1985]3SCR580 , it has been held that a co-operative society registered under the Punjab Co-operative Society Act, 1961 is a Corporation within the meaning of Arti-cle31A(l)(c). There is no dispute that respondent-4 co-operative societies are corporate entities.
63. The case of State of U. P. v. Vijay Bahadur Singh, : AIR1982SC1234 , deals with the conditions of auction. It is made clear in that case:
'that the Government was under no obligation to accept the highest bid and that no rights accrued to the bidder merely because his bid happened to be the highest.'
Under clause 10, it was expressly provided that the acceptance of bid at the time of auction was entirely provisional and was subject to ratification by the competentauthority, namely, the State Government. Therefore, the Government had right for good and sufficient reasons not to accept the highest bid, but even to prefer a tenderer other than the highest bidder. It is further observed :
'There may be a variety of good and sufficient reasons, apart from inadequacy of bids, which may impel the Government not to accept the highest bid.'
No exception can be taken to this well settled legal position.
64. Our attention was next invited to the case of Dr. G. Sarana v. University of Lucknow, : (1977)ILLJ68SC , for submitting on the aspect of waiver and estoppel that:
'Where a candidate for selection knowing fully well the relevant facts about members of the Selection Board voluntarily appeared for interview without raising any kind of objection against the constitution of the Selection Board and took a chance of favourable recommendation in his favour, it was not open for him to turn round and question the constitution of the Board when the decision was unfavourable to him.'
65. This judgment was pressed in service with a view to submitting that petitioners having submitted tenders cannot subsequently turn round when the tenders are not accepted and submit that the very process of inviting tenders was illegal.
66. It is difficult to appreciate this contention on the facts of the present case, as there can be no estoppel and waiver when it is submitted that very process of inviting tenders is violative of Art. 14 of the Constitution and was unauthorised and illegal. This objection is not analogous to an objection about the constitution of the committee which went into the selection process. It is a challenge to the very jurisdiction for the constitution of the committee. Thus, the objection goes to the root of the jurisdiction or power of the authorities to undertake the exercise. In such a case no question of waiver or estoppel would arise especially when it isnot the case of respondents 1 to 3 that because petitioners submitted tenders pursuant to tender notice, the respondents had irretrievably changed their position.
67. In case of Purshottama Ramanata Quenim v. Makan Kalyan Tandel, : [1974]3SCR64 , the Supreme Court had to consider whether a clause in the tender for grant of lease to distillery entitled Government to reject highest tender without giving any reasons was violative of Art. 14. It was held that:
'Such a clause is not violative of Art. 14 of the Constitution and that Government was not bound to accept the tender of the person who offers the highest amount.'
68. It is obvious that no tenderer caninsist that his tender being the highest or the lowest should necessarily be accepted if there are cogent reasons with the authority for not doing so.
69. In case of State of Orissa v. Hari-narayan Jaiswal, : [1972]3SCR784 , the Supreme Court had to examine the question of acceptance or rejection of bid for being sold the privilege to vend liquor. It was held that such privileges could be sold by public auction and there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted.
70. These observations were rendered in the peculiar facts of the case where the Government which invited bids to purchase privilege of vending liquor found that the highest bid also was not reflecting the correct rate of market price and therefore it entered into further negotiations and sold the privileges to some others. It is easy to visualize that these observations were made in the light of peculiar facts and circumstances of the case by the Supreme Court.
71. In the case of Trilochan Mishra v. State of Orissa, : AIR1971SC733 are found the followingobservations on which strong reliance was placed, they reads as under:--
'With regard to the grievance that in some cases the bids of persons making the highest tenders were not accepted, the facts are (hat persons who had made lower bids were asked to raise their bids to the highest offered before the same were accepted. Thus there was no loss to Government and merely because the Government preferred one tenderer to another no complaint can be entertained. Government certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. Moreover, 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.'
72. It becomes at once clear that when tenders are invited and if it is found that the person giving the lower bid is not suitable his bid is not necessarily to be accepted and can be rejected on rational and cogent grounds.
73. In support of the very same contentions, learned counsel for respondents also invited our attention to the decisions of Supreme Court in the case of M/s. Tikaram & Sons Ltd. v. Commr. of Sales Tax, U.P., : [1968]3SCR512 and Narayandas Shreeram Somani and Ramakrishna Ramratan Somani v. Sangli Bank Ltd, : [1965]3SCR777 , and in C. K. Achutan v. State of Kerala, : AIR1959SC490 , our attention was also invited to Madras High Court judgment, 1967 (2) Mad LJ 637 and 639 (sic). As the principles for judging the validity of the action of the authority under Art. 14 are well settled we do not dilate upon these judgments in detail save except stating they fall in line with the settled legal position.
74. Now, it is time for us to take stock of the situation.
Facts In Connection With Point No. 2
75. This point refers to award of contract to respondent-4 in KGF group. In thesegodowns the contract of the erstwhile private contractor was expiring on 30-6-1993. The respondent-1 invited tenders for appointment of loading, unloading and transport contractors at these godowns on 26-3-1993. The petitioners in Writ Petition No. 19921 & 22/93 contend that the workers working with the erstwhile contractor were the members of petitioner-1 society in these cases and therefore they had an edge over any other society for being awarded contract and they can be said to be more suitable. Still however, the contract was awarded to respondent-4 which was presided over by erstwhile contractor Muktar Ahmed. The petitioner-1 society in these petitions quoted 350% above the schedule of rates. Respondent-4 had quoted 329% above the schedule of rates, while the lowest rates of 189% were quoted by a private previous contractor and 243% were quoted by one another worker's co-operative society viz., petitioner's society in Petition No. 24272/93. Thus, petitioner in W.P. No. 24272/93 had quoted the lowest rates so far as tenders representing co-operative societies were concerned. The tenders were opened on 15-4-1993. Thereafter, respondents-1 to 3 followed a curious course. They presumably on recommendation of Asstt. Registrar of Co-operative Societies, Kolar, made a counter offer only to respondent-4 to reduce its rates if so advised to 189% which was the lowest rate quoted by a private previous contractor. That counter offer was made or in a way negotiation was made by respondent-4 behind the back of petitioners in these petitions. Therefore, they got no opportunity to take part in further negotiations or to decide whether they would like to reduce their rates to the lowest as was agreed to by respondent-4. Ultimately, contract was awarded to respondent-4. This action on the part of respondents-1 to 3 is patently arbitrary and violative of Art. 14 of the Constitution of India. It gave unfair advantage to respondent-4 and totally discriminated against the petitioners in this group of petitions.
76. In order to salvage the situation the respondents have contended that because the Asstt. Registrar of Co-operative Societies informed the respondents 1 to 3 that respondent-4 Society was consisting of members who were local workers while petitioner-I Society in W.P. No. 19921 & 19922/93 was registered at Bangalore and was not consisting of local workers at Kolar, it was eliminated from further negotiations and so far as petitioners in Petition No. 24272/93 is concerned it was eliminated because it had no membership of any local worker. Even assuming that the stand of respondent may be justified so far as petitioner in WP No. 24272/93 was concerned, as it is not in dispute that it had no membership of any local worker, even then there was a clear contest for the award of contract between petitioner-1 Society in W.P. No. 19921 & 19922/93 on the one hand and respondent-4 on the other. As we have seen earlier respondent-1 was not a genuine labour Co-operative Society of erstwhile workers of contractors as erstwhile contractor himself became President of the Society and got it registered on the eve of offering tenders. Such a society could not be said to be at all eligible to offer tenders in the light of the policy decision taken by respondents 1 and 2 as per Ex. A & B. It is true that petitioner-I Society in WP No. 19921 & 19922/93 was registered at Bangalore but according to it, it had amongst its members local workers at Kolar who were working under the erstwhile contractor during the time his contract was in force. Therefore, they were eligible to be considered for awarding the contract. There was no earthly reason for respondents 1 and 3 to bypass such an eligible co-operative society of erstwhile workers from negotiations and to award contract behind its back to respondent-4 which was ex facie ineligible for being awarded such contract as it would amount to bringing back the erstwhile contractor by back door and giving him second innings. It is obvious that the society which he presided over, would be a labour co-operative society in name only, but in substance the erstwhile contractor Muktar Ahmed, who was its President, would be masquerading under the facade of so called Labour Co-operative Society of local workmen. No rational or cogent reason could be pointed out by respondents 1 to 3 for adopting such an arbitrary and illegal course while it awarded the contract for further two years from 1-7-1993 to respondent-4 society. It is also easy to visualise that in the tender notice, nowhere it was pointed out that preference would be given to a Co-operative Society of Labourers registered at Kolar District. There was therefore no occasion for respondents 1 to 3 to rely upon an extraneous circumstance that the Asstt. Registrar of Kolar District had recommended the case of respondent-4 for being awarded the contract. Even otherwise, such a recommendation was ex facie illegal as respondent-4 society which was in substance the limb of erstwhile contractor Muktar Ahmed was totally incompetent for being considered for awarding contract, when admittedly respondents 1 to 3 had taken a policy decision to eliminate private contractors in all future awarding of contracts for handling, loading, unloading and transporting of foodgrains at its godowns in India as per Annexure-A & B. Reliance placed by learned counsel for respondents 1 to 3 on a communication received on 31-3-1989 by local Manager from the Head Office of the Food Corporation of India also cannot be of much assistance. A question was posed for reply. It was to the effect that if more than one Labour Co-operative Society comes up in any depot, how the authorities were to check which is the society which is having majority membership and competence and who should then be awarded the work. The reply from the Head Office was:--
'It is not likely that more than one Labour Co-operative Society will come up in a depot. As you are aware, Labour Co-operative Societies have to be registered with the Registrar, Co-operative Societies and the bye-laws of such societies have to indicate specifically the jurisdiction or area of operation of the society. It is not likely that the Registrar of Co-operative Societies will register more than one Labour Co-operative with the same area of jurisdiction. If such a situation arises you may consult Registrar of Co-operative Societies and obtain his verdict of the society which should be recognised by the corporation for award of contract.'
Now it is obvious that the said reply sought in connection with the situation which may arise during working out of policy decision as per Annexure-A & B, instead of helping respondents 1 to 3, goes against them. There would be no occasion for respondents 1 to 3 to solicit any opinion of the Assistant Registrar of Co-operative Societies in connection with a co-operative society of labourers which is presided over by erstwhile contractor. Such an opinion sought for in connection with an incompetent society cannot augment the case of respondents. Even otherwise, the reply shows that instead of inviting tenders, what the officers of Food Corporation of India should do is to find out which is the Labour Co-operative Society consisting of majority of workmen of erstwhile contractors and to award contracts to them. The reply nowhere entitles the Food Corporation of India officers to once again resort to contract labour system. Therefore, it must be held that even assuming such tenders could be called for, in the process of awarding contract to respondent-4, respondents 1 to 3 clearly acted arbitrarily and irrationally. Consequently, award of contract to respondent-4 in Kolar group of matters must be held to be illegal, void and hit by Art. 14 of the Constitution of India. This is not a case in which respondents Nos. 1 and 2, on cogent reasons, have discarded the lowest offer and have chosen any one else on any relevant ground. On the contrary, it is a case of open arbitrary act and a discriminatory action resorted to by respondents Nos. 1 to 3 to systematically avoid petitioner-1 society in Writ Petition Nos. 19921 and 19922 of 1993, and awarding contract to ex-contractor Muktar Ahmed. Thus, under the guise of inviting tenders from open market, respondents 1 to 3 have brought in erstwhile contractor Muktar Ahmed by back-door by awarding contract to respondent-4 which is practically his pocket-society. Such an action cannot stand the test of Art. 14 of the Constitution of India.
77. Point No. 2, therefore, will have to be answered in the affirmative in favour of the petitioners and against the respondents.
Facts In Connection With Point No. 3
78. So far as awarding contract to respondent No. 4 in Writ Petitions 19907 and 19908/93 is concerned, it may be noted that there was already a godown at Hubli where members of petitioner-1 society were working as labourers on piece rate basis. It is true that Bommapur godown was newly established at Hubli but that godown was a few kilometers away from Hubli godown where petitioner-1 society was already functioning. For that godown tenders were invited for entering into labour contract for handling food stuffs. Even the learned counsel for respondents 1 to 3 who stated that the policy Ex. A & B would not apply to this new godown, ultimately had to accept the legal position that the spirit of said policy would apply. He has rightly accepted this position as otherwise res-pondent-1 'State' within the meaning of Art. 12 would be legitimately charged of an arbitrary action, in connection with the workers to be engaged in new godowns. Therefore, keeping in view the spirit of policy underlying Ex. A & B, let us see whether the award of contract to respondent-4 society for Bommapur godown can stand the test of Art. 14 of the Constitution. Even in this case, respondent-4 society as seen in earlier case was in substance controlled by ex-contractor Gangadhar. Therefore, this society of local workers, presided over by Gangadhar, was clearly incompetent to offer its tender as in substance it would be Gangadhar who would work as contractor and not the illiterate labourers who might be local workers and who would not have independent say in the matter of working of contract or fixation of rates and they would all be at the receiving end. The petitioner-1 society also offered its tenders for carrying on work at Bommapur godown. It had amongst its members local workers though it was functioning at Bangalore. When the tenders were opened it was found that petitioner-society quoted 136% above schedule of rates, while respondent-4 quoted 165% above the schedule of rates. Thus, the petitioner-society's tender was the lowest. Still behind the back of petitioner-1 society, respondents 1 to 3 made a counter offer only to respondent-4 and awarded contract to it. This act on the part of respondents 1 to 3 is ex facie arbitrary and is based on no valid and cogent reasons.Respondent-4 society was the alterego of erstwhile contractor Gangadhar who was its President and practically it was his limb. When, as per the spirit of Annexures A & B the erstwhile contractors are to be totally eliminated, it is difficult to see as to how he could have a second innings and be allowed to come by way of back door by forming a society of local workers and himself remaining at the helm of affairs as its President. Recommendation of respondent-4 by Asstt. Registrar of Co-operative Societies, Hubli, was clearly an extraneous consideration. For even apart from being an incompetent recommendation, it was for an unsuitable and unauthorised person. Even otherwise, when respondent-4 society had quoted higher rates than the petitioner-1 society, in fairness the latter had to be called for negotiations. There was nothing fundamentally wrong with petitioner-1 society which is already having contract for handling such work at the nearby godown at Hubli. This is not a case in which some suitable person was selected by respondents 1 to 3 for the award of contract as compared to petitioner-1 society. On the contrary, this is a case in which by-passing a suitabie person contract was awarded in an arbitrary and discriminatory manner by having negotiations only with respondent-4 society which was otherwise incompetent to be considered for awarding such contract and whose claim should have been summarily rejected.
79. For these reasons therefore, it must be held that awarding of contract to respondent-4 society in Hubli group of matters, is violative of Art. 14 of the Constitution of India and is required to be quashed.
80. Point No. 3 is also answered in the affirmative in favour of petitioners and against respondent No. 4.
Point No. 4 :
81. Now, remains the'question as to what relief can be given to the petitioners. In view of our findings on Points Nos. 1 to 3, Writ Petitions Nos. 19907 & 19908/93, 19921 & 19922/93, and 24272/93 shall stand allowed to the following extent:--
(1) The contracts for handling and transport work at KGF and Bangarpet in Kolar District, and Bommapur at Hubli (Dharwar District) awarded to concerned respondent-4, are quashed.
(2) Respondents 1 to 3 are directed, in the light of the policy decision at Annexures A & B, to make a list containing the names, age, etc. of labourers who were working under erstwhile contractor at KGF and Bangarpet godowns in Kolar District when the contract was current up to 30-6-1993 and to see that a co-operative society of such erstwhile workers is formed and got registered under the Karnataka Co-operative Societies Act at Kolar. Efforts should be made to see that as far as possible only one such society is formed, but in case these erstwhile workers desire to form more than one society they may be formed, but in no case any worker of erstwhile contractor earlier working at these godowns should be denied work at these godowns unless the worker refuses to become a member of such society. Respondents 1 to 3 should see that while undertaking this exercise no helper or sympathiser or supporter of such workers becomes President or officebearer of the society if he is an erstwhile contractor or his representative or nominee. In short, erstwhile contractors should be totally eliminated from having any connection with such Labour Co-operative-Society or Societies. It will be permissible for such newly formed co-operative society or societies to get affiliated with petitioner-1 society or any other society which may be functioning as an apex society consisting of members working as labourers in different godowns in the State, and merely because such a newly formed society is affiliated to such apex society it should not be treated ineligible for awarding of contract as per policy decision (Annexures A & B). Such newly formed society/societies of the erstwhile workers should be awarded the contract in the first instance for two years and such contracts should be renewed from time to time without calling for any tenders. The only negotiation at the time of renewal should be centered round the fixation of correct market rate of labour charges. In short, it must be seen that all the erstwhile workers who were working with contractor at the godowns are offered perennial and continuous work at godowns through their co-operative society and there is no break at any time in such continuity of work. These workers' society should be treated on principal-to-principal basis by respondent-3 and while doing so the shadow of erstwhile contractor should be scrupulously kept away and avoided.
(3) In case of Bommapur godown in Hubli, respondents 1 to 3 are directed to prepare a list of local workers who are willing to work at that godown and in that list the local workers who are members of petitioner-1 society and who are actually working at Hubli godowns, if willing, also should be included and a new Labour Co-operative Society for such workers who are willing to work at Bommapur Godown should be got registered by respondents 1 to 3 at Hubli. While doing so, care should be taken to see that neither erstwhile contractor Gangadhar nor any other erstwhile contractor working in any of the godowns at Hubli or in surrounding area or in any part of the State should be allowed to project his image by being an office-bearer, President or otherwise of such society.
82. It would be open for such new society of local workers at Hubli to get it affiliated to apex co-operative society like petitioner-1 and such society will be eligible for awarding of contract in the first instance for two years and thereafter such contract should be renewed from time to time. Care should be taken by respondents 1 to 3 to see that work offered to these workers is not discontinued at any time in future and negotiations can take place with them on principal-to-principal basis only for purpose of refixation of labour charges from time to time. But the thread of continuity of work as offered to them should not be disrupted at any time. Care also should be taken to see that no willing worker at Hubli who is ready to offer his services at Bommapur godown is left out of consideration for being included as member of newly formed society.
(4) We are giving these directions in the light of the duty entrusted to local officers of respondent-1 by the policy decision at Annexures A & B. In fact, as per that policy decision it is for the local officers of respondent-1 Corporation to oversee the formation of such labour co-operative societies of local workmen wherein the shadow of erstwhile contractors whoever they are and wherever they are working is scrupulously avoided and they are necessarily eliminated in such an exercise as per policy decision Annexures A & B.
(5) The aforesaid exercise shall be carried out by respondents 1 to 3 within a period of eight weeks from the date of receipt of this order at their end and in the meantime the present arrangements as existing on spot in the concerned godowns in Kolar Group and Hubli Group may continue so that there may not be any hiatus in the working at these godowns.
(6) There will be no order as to costs in these writ petitions.
83. Writ Appeals Nos. 1496 and 1497/93 and 1692 and 1693/93 will stand disposed of as having become infructuous with no order as to costs.
84. Order accordingly.