Chotanagpur Agro Agencies Vs. State of Jharkhand and ors. - Court Judgment

Excerpt:
- motor vehicles act, 1988[c.a.no.59/1988] section 166; [a.k. patnaik, cj, a.k. gohil & s. samvatsar, jj] application for compensation for personal injury death of injured claimant subsequently for some other reasons held, claim for personal injury will abate on the death of claimant. claim will not survive to his legal representative except as regards claim for pecuniary loss to estate of claimant. - respondents obtained expert opinion from farm superintendent, ranchi agriculture college farm, birsa agriculture university, kanke regarding the type of tractors best suited for farmers of jharkhand. learned advocate general very clearly submitted that it is only in course of hearing of lpa no 368 of 2002 when the respondents could know the mind of the hon'ble judge and in order to put all controversies at rest and to take up the matters afresh in the light of the observation of the hon'ble court cancelled the tender and the supply order placed with the appellant. 10. before appreciating the rival contention of the parties, we would first like to state some more facts. the third issue was as to whether it could not have been desirable if a multi member committee would have been entrusted the task of selection of the tractors, on the basis of the best available options and the lowest price. before answering the question we would like to refer some of the decisions of the supreme court where the law has been set at rest in the matter of state action in contractual matters. 13. it was well settled law that the action of the state executive authority must be subject to rule of law and must be confirmed by reasonings, the action of the state organ can be checked by article 14 of the constitution. a petition under article 226 of the constitution would certainly lie to direct performance of a statutory duty by 'order authority' as envisaged by article 12' 14. it is well settled rule of administrative laws that an executive authority must vigorously hold to the standard by which it professes its action to be judged and it must scrupulously observe those standard on pen and invalidation of act in violation of that. principle of reasonableness and rationality which is legally as well as philosophically and essentially an element of equality or unreasonableness is projected by article 14 and it must characterize every action, whether it be under the authority of law or in exercise of executive power without making of law. it is well settled that there can be 'malice in law'.existence of such 'malice in law' is part of the critical apparatus of a particular action in administrative law. indeed 'malice in law' is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action. ' 16. in the instant case, firstly we would like to discuss the reason for the cancellation of the tender and the supply order in order to find out whether such action of the state is arbitrary action and/or on extraneous consideration or whether it satisfy the requirement of reasonableness. in the counter affidavit respondent/state has very clearly stated that the only reason for cancelling the tender was because of some observation made by the division bench while hearing lpa no. learned single judge is of the view that technical aspects like availability of spare parts, number of service stations, engine, training facilities were not discussed. however, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. there can be no question of infringement of article 14 if the government tries to get the best person or the best quotation.m.y. eqbal, j.1. this appeal under clause 10 of the letters patent is directed against the judgment dated 18:12.2002 passed by the learned single judge in wp (c) no. 5981/2002 whereby the learned single judge refused to interfere with the decision of the respondents withdrawing/ canceling the tender and dismissed the writ petition.2. the petitioner-appellant, m/s-chotanagpur agro agencies filed the aforementioned writ petition being wpc 5981/ 2002 for issuance of writ in the nature of certiorari for quashing the notice dated 14.8.2002 published in the daily newspaper, namely, 'prabhat khabar whereby the concerned respondent cancelled the tender published in the newspaper dated 2.5.2002 and the corrigendum published on 19.5.2002 in respect of the tender inviting supply of tractors with which was opened on 23.5.2002 and further for quashing the letter dated 14.9.2002 issued by the concerned respondent whereby the petitioner was directed to refund the amount paid to it for the supply of tractors.3. the facts of the case lie in a narrow compass. the state of jharkhand has a scheme to purchase and distribute tractors to the members of schedule tribes in the state with the financial assistance of national scheduled caste finance & development corporation and national scheduled tribes finance & development corporation new delhi. first tender was invited for purchase of 68 tractors 40/45 h.r vide notice dated 5.4.2002 published in the news papers. when the respondent recollected and perused the letters sent to the above referred corporation namely, nsfdc/nstfdc with a proposal for purchase of 40 tractors & not 40/45 h.r, the advertisement dated 5.4.2002 inviting tenders was cancelled through newspapers on 13.4.2002 due to non coverage of 45 h.r tractors in the sanctioned scheme. respondents obtained expert opinion from farm superintendent, ranchi agriculture college farm, birsa agriculture university, kanke regarding the type of tractors best suited for farmers of jharkhand. an advertisement inviting tender for purchase of 40 h.r tractors with 2700 c.c. was published in the five newspapers vide notification-dated 12.5.2002. since manufactures of 40 h.r/2700 c.c. tractors are very few in number, it was found proper to publish a corrigendum in the newspaper dated 19.5.2002 for reading 2500 c.c. and above instead of 2700 c.c. which was published in the newspaper on 12.5.2002. in response to the advertisement inviting tenders in newspapers dated 19.5.2002 about 19 manufacturers/dealers filed their tenders for supply of tractors & trailors and the tenders were opened as scheduled on 23,5.2002 in presence of the tenderers and comperative chart of the cost offered by them was prepared and their signatures were obtained on the chart. then a detailed technical comparative charts were prepared on 29.5.2002 giving details of the tender including warranty, authorized service, stations, spare parts dealers etc. a separate cost comparative chart was prepared on showing the price quoted by the tenderers. keeping in view the specification of tractors required as per the tender the following three manufacturers were short listed :(i) tafe-mf 241(ii)hindustan- mg 405(iii) escorts-440 p.t. (8+2)4. considering the rate & price, warranty, install base, products support, service, recognition from popular institutions, training facilities, service support, infrastructure, insurance policy, provision of annual maintenance contract, the tender of the appellant, m/s chotanagpur agro agency was accepted and supply order for 68 numbers of tractors was issued. as per the terms and conditions, a sum of rs. 2,14,05,720/- was paid to the said appellant by demand draft dated 30.5.2002. these tractors were meant for being handed over to members of scheduled caste. further order for supply of 65 numbers of tractors & trailers was placed with the said m/s chotanagpur agro agencies and a sum of rs. 2,04,61,350/- was paid by demand draft. further sum of rs. 1,74,12,850/-and rs. 30,48,500/- was paid by two cheques. after receipt of the amount the appellant m/s chotanagpur agro agency informed the respondents through their letter that tractors and trailers are ready for delivery and requested the respondents to kindly arrange to take the delivery of the tractors.5. it appears that one of the tenderers, m/s atma ram agencies ltd. filed wpc no. 4310/2002 assailing the decision of the respondents to accept the tender of the appellant m/s chotanagpur agro agencies. the contention of the writ petitioner was that the supply order issued in favour of the present appellant was illegal, arbitrary, unfair, and discriminatory and suffers from lack of transparency and fairness.6. the aforesaid two writ petitions i.e. 5981/2002 and wpc 4310/2002 were taken up for hearing by the learned single judge. since during the pendency of wpc no. 4310/2002 filed by atma ram agencies ltd. the decision of the respondents to take supply of tractors from the appellant was cancelled, the said writ petition became infructuous. so far wpc no. 5981/2002 filed by the present appellant challenging the decision of the respondents canceling the tender is concerned, the same was heard by the learned single judge and the said writ petition was dismissed by the impugned judgment holding that there being various infirmities in dealing with the matter in issuing the supply order etc. the respondents cancelled the tender which needs no interference by the court. hence this appeal.7. mr. r.k. jain, learned sr. counsel appearing on behalf of the appellant assailed the impugned judgment of the learned single judge on various grounds. learned counsel firstly submitted that the entire process of tender was completed and the supply order having been issued, the contract between the appellant and the respondents was concluded and pursuant to that concluded contract the price of the tractors was paid to the appellant, who procured the tractors. at that stage the cancellation of the contract by the state without any basis is wholly illegal, arbitrary and mala fide. learned counsel submitted that in view of the fact that the entire tractors as per the order placed by the concerned respondents were ready for delivery since long, the concerned respondents had no authority in law to cancel the notice inviting tenders. learned counsel further submitted that the contract was cancelled by the respondents on extraneous consideration, which is evident from the counter affidavit filed by the respondents. learned counsel lastly submitted that the action of the respondents in canceling the tender is violative of article 14 of the constitution of india, and is wholly illegal, arbitrary and mala fide.8. mr. a.k. sinha, learned advocate general on the other hand submitted that the tender was invited by the respondents for the purchase of tractors and in response to the aforesaid tender notice 19 manufacturers/dealers filed their tenders. learned counsel contended that after observing all the formalities as per the rules and established procedure and after keeping in view the specification of the tractors, three manufacturers were short- listed including the appellant. then considering the rate, price, warranty, installation, base, product reports, service, recognition from popular institutions, training facilities etc. and considering all aspects of the matter the respondents decided by a speaking order to put supply order for the supply of tractors to the appellant. learned advocate general very clearly submitted that it is only in course of hearing of lpa no 368 of 2002 when the respondents could know the mind of the hon'ble judge and in order to put all controversies at rest and to take up the matters afresh in the light of the observation of the hon'ble court cancelled the tender and the supply order placed with the appellant.9. we have also heard mr. s.n. lal, learned counsel appearing on behalf of m/s atma ram agency ltd., petitioner in cwjc no. 2827 of 2002. we have also heard mr. ajit kumar, who made his submission on behalf of the intervenor.10. before appreciating the rival contention of the parties, we would first like to state some more facts.11. when the tender of the appellant was accepted and the supply orders were issued, one of the tenderer m/s international tractors ltd. filed a writ petition being wps no. 3408 of 2002 challenging the entire process of award of tender by the respondents to the appellant. the said writ petition was dismissed by the hon'ble bench of this court in terms of order dated 20.6.2002. the writ petitioner then preferred letters patent appeal being lpa no. 368/2002. in the said appeal, a detailed counter affidavit was filed by the respondents namely secretary, jharkhand state tribal cooperative development corporation stating inter alia that there was no irregularities and illegality in the tender process and the order for supply of tractors has already been placed with the appellant. it was further contended that there was no partiality and several participants were participated in the tenders but their tenders were rejected as specification and other conditions did not match. the said lpa no. 368/2002 was disposed of by a division bench of this court on 28.8.2002 in the following terms :--'during the course of marathon hearing several issues forming the subject matter of this appeal were canvassed and argued before us by the learned counsel for the parties. one such issue related to the prescription of specification for the purchase of the tractors; the other about the competence of an individual junior ranking officer in birsa agricultural university on whose recommendations the specifications were fixed. the third issue was as to whether it could not have been desirable if a multi member committee would have been entrusted the task of selection of the tractors, on the basis of the best available options and the lowest price.during the course of argument it came out that initially the respondents had invited quotations for purchase of tractors of 40/45 h.p., this was later on cancelled. subsequently, another nit was issued inviting quotations for purchase of tractors having engine of 40 hp (2700 c.c.) and this was subsequently modified in the sense that the cubic capacity was changed from 2700 c.c. to 2500 c.c. and above. this modification and change in the specification gave rise to the controversy forming the subject matter of the present appeal. it was argued during the course of hearing that either the respondents should have specified the h.p. only or the cubic capacity of the engine only because specifying the h.p. and the cubic capacity simultaneously, perhaps, has not required.it was also argued that merely on the basis of an advise rendered by a junior ranking farm superintendent in the agricultural university, the respondents should not have taken this vital decision and they should have involved technical experts preferably automobile engineers who knew about the tractors and the plying of the tractors in the field. it was also argued that actually a multi member committee should have collectively taken a decision in the matter.in the meanwhile however, the respondents, namely, jharkhand state tribal cooperative development corporation limited have issued a notice cancelling the aforesaid n.i.t. and because of the cancellation of the aforesaid n.i.t. this appeal has now been rendered infructuous.mr. m.k, jha, learned counsel appearing for the appellant does not press the appeal. the appeal is disposed off as not pressed.'12. after hearing learned counsel appearing for the parties the only question that falls for consideration is as to whether cancellation of tender and the supply order by the respondents is justified and in accordance with law. before answering the question we would like to refer some of the decisions of the supreme court where the law has been set at rest in the matter of state action in contractual matters.13. it was well settled law that the action of the state executive authority must be subject to rule of law and must be confirmed by reasonings, the action of the state organ can be checked by article 14 of the constitution. if the government action in the matter of entering or not entering into contracts, fails to satisfy test of reasonableness the same would be unreasonable. similarly action of the state or its instrumentality in cancelling the contract must not be arbitrary and on extraneous consideration. in the case of gujrat state financial corporation v. m/s lotus hotels private limited, (air 1983 sc-848) their lordship while considering the executive action in the matter of contractual obligation observed :--(1) 'it is too late in the day to contended that the instrumentality of the state can commit breach of a solemn undertaking on which other sides has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract. the principle of promissory estoppel would certainly estop the corporation from backing out of its obligation arising from a solemn promise made by it to the respondent. the respondent acting upon the solemn promise made by the appellant incurred huge expenditure and if the appellant is held to its promise the respondent would be put in a very disadvantageous position'.....'further the rule inhibiting arbitrary action by the government would equally apply where such corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action must be in conformity with some principle which meets the test of reason and relevance'......'if the appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury following from its unreasonable conduct to the respondent. in such a situation the court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. a petition under article 226 of the constitution would certainly lie to direct performance of a statutory duty by 'order authority' as envisaged by article 12' 14. it is well settled rule of administrative laws that an executive authority must vigorously hold to the standard by which it professes its action to be judged and it must scrupulously observe those standard on pen and invalidation of act in violation of that. the state action must not be arbitrary but must be based on some rational and relevant principle, which is non-discriminatory. it must not be guided on extraneous or irrelevant consideration because that would be denial of equality. principle of reasonableness and rationality which is legally as well as philosophically and essentially an element of equality or unreasonableness is projected by article 14 and it must characterize every action, whether it be under the authority of law or in exercise of executive power without making of law. the state therefore, cannot act arbitrarily in entering into relationship, contractual or otherwise with a third party but its action must be conform to some standard or norms which is rational and non-discriminatory.15. in the case of mahabir auto stores v. indian oil corporation, air 1990 sc 1031, the supreme court while considering similar question held that :--(2) 'the state acts in its executive power under article 298 of the constitution in entering or not entering in contracts with individual parties. article 14 of the constitution would be applicable to that exercise of power. therefore, the action of state organ can be checked under article 14. every action of the state executive authority must be subject to rule of law and must be informed by reason. so, whatever be the activity of the public authority it should meet the test of article 14 of the constitution. if a government action, even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. rule of reason and rule against arbitrariness and discrimination, rule of fair play and natural justice are part of the rule of law applicable in situation of action by state instrumentality in dealing with citizens. even though the right of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, air play, natural justice, equality and non-discrimination. it is well settled that there can be 'malice in law'. existence of such 'malice in law' is part of the critical apparatus of a particular action in administrative law. indeed 'malice in law' is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action.'16. in the instant case, firstly we would like to discuss the reason for the cancellation of the tender and the supply order in order to find out whether such action of the state is arbitrary action and/or on extraneous consideration or whether it satisfy the requirement of reasonableness.17. as noticed above, the decision of the respondent-state in accepting tender of the appellant and issuing supply order was challenged by the m/s international tractors ltd. in wps no. 3408 of 2002. the writ petition was dismissed by a bench of this court and against that dismissal order the said writ petitioner preferred lpa no. 368/2002. while the said appeal was pending for hearing the impugned order of cancellation of tender was issued by the respondent-state. reasons for cancellation of tender has been stated in the counter affidavit filed in the said appeal. a copy of the counter affidavit filed by the respondent/state in the said appeal has been annexed as annexure 19 to this memo of appeal. the stand of the respondent/state in the counter affidavit was that after observing all the formalities as per the rules and established procedure and after keeping in view the specification as required, the tenders submitted by 19 manufacturers were considered and out of that, tender of three manufacturer were short-listed. thereafter, considering the rate and price, warranty, installation base, project report, service recognition from popular institution, training facility, service report, infracture, insurance policy, provision of maintenance etc. the tender of the appellant was finally accepted and supply order was issued. in para 8 of the counter affidavit it is stated by the respondent/state that in course of hearing of lpa no. 368 of 2002 could know the mind of the hon'ble court and in order to put all controversies at rest and to take up the matter afresh in the light of the observation of the hon'ble court respondent cancelled the tender order placed with the appellant. para 8 of the counter affidavit filed by the respondent/state is reproduced herein below :-- 'that here it is most humbly submitted that the respondent no. 2 when in course of hearing of the lpa no. 368/2002 could know the minds of the hon'ble court and in order to put all controversies at rest and to take up the matters afresh in the light of the observations of the hon'ble court cancelled the n.i.t. and order placed with this petitioner.(photocopy of the cancellation of n.i.t. published in prabhat khabar dated 14.8.2002 is made annexure a')18. the impugned notice dated 14.8.2002 cancelling tender reads as under :--'the jharkhand state tribal cooperative development corporation ltd. ranchi.noticereference to tender inviting supply of tractors with trailer to jharkhand state tribal cooperative development corporation ltd. ranchi published in the news papers on 12.5.2002 and corrigendum, published on 19,5.2002 and which was opened on 23.05.2002 it is hereby cancelled. fresh tender will be invited shortly.sd/-managing director 14.8.02.19. it is therefore, clear that no reason has been assigned in the notice for the cancellation of tender and supply order issued in favour of the appellant. in the counter affidavit respondent/state has very clearly stated that the only reason for cancelling the tender was because of some observation made by the division bench while hearing lpa no. 368 of 2002. in my considered opinion therefore, the impugned order of cancellation of tender and the supply order was fully guided by extraneous and irrelevant consideration and it did not meet the requirements of reasonableness. the action of the respondent prima facie appears to be arbitrary and based on some irrational and irrelevant principal, which is discriminatory.20. besides the above, admittedly after the tender of the appellant was accepted, the supply orders were issued and even price of the tractors have been paid by the respondent to the appellant. it has also not been disputed that after receipt of the price of the tractors the appellant procured required number of tractors and requested the respondents to take delivery of those tractors. it is only thereafter, respondents cancelled the tender and the supply orders merely on the basis of some observation made by the court while hearing the appeal arising out of a writ petition filed by another tenderer whose quotation was not accepted. surprisingly, the impugned order of cancellation was issued in utter disregard and violation of principles of natural justice inasmuch as appellant was not even given opportunity to show cause before cancelling the concluded contract and the supply order.21. in the impugned judgment, the learned single judge after considering the facts came to the conclusion that there were various infirmities in dealing with the matter in issuance of supply order etc. learned single judge is of the view that technical aspects like availability of spare parts, number of service stations, engine, training facilities were not discussed. learned judge took notice of the observation whereby division bench in lpa no 368 of 2002. from perusal of the order passed in the aforementioned appeal, it appears that the division bench simply recorded the submission made by the counsels on the issue related to the specification in the purchase of tractors and also about the competency of the authority on whose recommendation specifications were fixed. the appeal however, was dismissed as not passed.22. the scope of judicial review of action of the state in contractual matter has been discussed at length by the supremecourt in the case of tata cellular v. unionof india. (1994) 4 scc 651, their lordshipsobserved :--'it cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favoritism. however, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. government is the guardian of the finances of the state. it is expected to protect the financial interest of the state. the right to refuse the lowest or any other tender is always available to the government. but, the principles laid down in article 14 of the constitution have to be kept in view while accepting or refusing a tender. there can be no question of infringement of article 14 if the government tries to get the best person or the best quotation. the right to choose cannot be considered to be an arbitrary power. of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.'23. their lordship further observed that judicial review does not mean reviewing the merit of the decision but only the decision making process itself. judicial review is quite different from an appeal where court is concerned with the merit of the decision. since power of judicial review is not an appeal from the decision, the court cannot substitute its own decision.24. taking into consideration the entire facts of the case, it is clear that tender of the appellant was accepted after considering the tenders of all other participants and supply orders were issued. some of the tenderers moved this court and it was only because some observation made by the court, the tender and the supply order was cancelled by the respondents and that too without complying the requirements of article 14 of the constitution of india. the action of the respondents in cancelling the tender and the supply order is therefore illegal, arbitrary and violative of principles of natural justice.25. for the reasons aforesaid, this appeal is allowed and the impugned judgment passed by the learned single judge is set aside. consequently cancellation of tender and the supply order issued in favour of the appellant is set aside.consequently cancellation of tender all the supply order issued in favour of the appellant is set aside.vikramaditya prasad, j.26. i agree.