Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment

Judgment:

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			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
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			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
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		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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Y.P. Nargotra, J.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3).

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
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		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
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		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
)
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3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
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$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
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$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
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		(int) 1 => 'vaishno-flour-mills-vs-union-india'
	)
)
$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
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$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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61. The following data will be used for determining RRs.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
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$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
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	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
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		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
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		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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Serial Articles/ Qty Rates

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
)
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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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1999-01 2001-03 2003-05 Average of Last 03

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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Contra-cts

(A) Rates for Supply of the following:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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1. Collection 1,797 140.00 129.50 150.00 139.83

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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of wheat

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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2. Grinding of 1,770 187.50 169.00 249.50 202.00

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
)
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wheat

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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Average 163.75 149.25 199.75 170.92

10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
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	'casename_url' => 'vaishno-flour-mills-vs-union-india',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
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		'respondent' => 'Union of India (Uoi) and ors.',
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$ctype = ' High Court'
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$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
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		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
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		'circuit' => null
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are:

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
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		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(1) The modern trend points to judicial restraints in administrative action;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides;

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2006(3)JKJ627',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Contract',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'vaishno-flour-mills-vs-union-india',
	'args' => array(
		(int) 0 => '900732',
		(int) 1 => 'vaishno-flour-mills-vs-union-india'
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2006(3)JKJ627',
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			'respondent' => 'Union of India (Uoi) and ors.',
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		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2006(3)JKJ627',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Contract',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'vaishno-flour-mills-vs-union-india'
$args = array(
	(int) 0 => '900732',
	(int) 1 => 'vaishno-flour-mills-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/900732/vaishno-flour-mills-vs-union-india'
$ctype = ' High Court'
$caseref = 'Tata Cellular v. Union of India<br>'
$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
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20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of.

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	'title_for_layout' => 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '900732',
			'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
			'appealno' => 'OWP 428/2005',
			'appellant' => 'Vaishno Flour Mills',
			'authreffered' => '',
			'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
			'casenote' => ' - ',
			'caseanalysis' => null,
			'casesref' => 'Tata Cellular v. Union of India;',
			'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
			'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
			'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
			'court' => 'Jammu and Kashmir',
			'court_type' => 'HC',
			'decidedon' => '2005-08-10',
			'deposition' => 'Petition allowed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Y.P. Nargotra, J.',
			'judgement' => '<p style="text-align: justify;">Y.P. Nargotra, J.</p><p style="text-align: justify;">1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p style="text-align: justify;">2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p style="text-align: justify;">3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p style="text-align: justify;">4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p style="text-align: justify;">5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p style="text-align: justify;">6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p style="text-align: justify;">In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p style="text-align: justify;">7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p style="text-align: justify;">61. The following data will be used for determining RRs. </p><p style="text-align: justify;">(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p style="text-align: justify;">(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p style="text-align: justify;">(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p style="text-align: justify;">62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p style="text-align: justify;">63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p style="text-align: justify;">8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p style="text-align: justify;">9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p style="text-align: justify;">Serial Articles/ Qty Rates</p><p style="text-align: justify;"> Service</p><p style="text-align: justify;"> 1999-01 2001-03 2003-05 Average of Last 03</p><p style="text-align: justify;"> Contra-cts<p style="text-align: justify;">(A) Rates for Supply of the following:</p><p style="text-align: justify;">1. Collection 1,797 140.00 129.50 150.00 139.83</p><p style="text-align: justify;"> of wheat</p><p style="text-align: justify;">2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p style="text-align: justify;"> wheat</p><p style="text-align: justify;"> Average 163.75 149.25 199.75 170.92<p style="text-align: justify;">10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p style="text-align: justify;">11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p style="text-align: justify;">The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p style="text-align: justify;">12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p style="text-align: justify;">The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p style="text-align: justify;">13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p style="text-align: justify;">The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p style="text-align: justify;">(1) The modern trend points to judicial restraints in administrative action; </p><p style="text-align: justify;">(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p style="text-align: justify;">(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p style="text-align: justify;">(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p style="text-align: justify;">(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p style="text-align: justify;">(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p style="text-align: justify;">14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p style="text-align: justify;">15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p style="text-align: justify;">16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p style="text-align: justify;">17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p style="text-align: justify;">18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p style="text-align: justify;">19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p style="text-align: justify;">20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p style="text-align: justify;"></p><p style="text-align: justify;">',
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$title_for_layout = 'Vaishno Flour Mills Vs Union of India Uoi and ors - Citation 900732 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '900732',
		'acts' => '<a href="/act/51737/constitution-of-india-complete-act">Constitution of India</a> - Article 14',
		'appealno' => 'OWP 428/2005',
		'appellant' => 'Vaishno Flour Mills',
		'authreffered' => '',
		'casename' => 'Vaishno Flour Mills Vs. Union of India (Uoi) and ors.',
		'casenote' => ' - ',
		'caseanalysis' => null,
		'casesref' => 'Tata Cellular v. Union of India;',
		'citingcases' => 'Serial   Articles/        Qty                         Rates
         Service
                                      1999-01      2001-03     2003-05    Average of Last 03
                                                                              Contra-cts
;1.       Collection     1,797          140.00      129.50      150.00       139.83
         of wheat
2.       Grinding of    1,770          187.50      169.00      249.50       202.00
         wheat
                       Average         163.75      149.25      199.75       170.92
',
		'counselplain' => ' M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.',
		'counseldef' => ' V.K. Magoo, ASG and; Ashok Parihar, Adv.',
		'court' => 'Jammu and Kashmir',
		'court_type' => 'HC',
		'decidedon' => '2005-08-10',
		'deposition' => 'Petition allowed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Y.P. Nargotra, J.',
		'judgement' => '<p>Y.P. Nargotra, J.</p><p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). </p><p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. </p><p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. </p><p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. </p><p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. </p><p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: </p><p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.</p><p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: </p><p>61. The following data will be used for determining RRs. </p><p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; </p><p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; </p><p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. </p><p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. </p><p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.</p><p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. </p><p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: </p><p>Serial Articles/ Qty Rates</p><p> Service</p><p> 1999-01 2001-03 2003-05 Average of Last 03</p><p> Contra-cts<p>(A) Rates for Supply of the following:</p><p>1. Collection 1,797 140.00 129.50 150.00 139.83</p><p> of wheat</p><p>2. Grinding of 1,770 187.50 169.00 249.50 202.00</p><p> wheat</p><p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. </p><p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: </p><p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.</p><p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: </p><p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.</p><p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: </p><p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: </p><p>(1) The modern trend points to judicial restraints in administrative action; </p><p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; </p><p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; </p><p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; </p><p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; </p><p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. </p><p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. </p><p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. </p><p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. </p><p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. </p><p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. </p><p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. </p><p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p></p><p>',
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$content = array(
	(int) 0 => '<p>Y.P. Nargotra, J.',
	(int) 1 => '<p>1. Union of India through its Executive Officer, MG ASC Northern Command, issued a tender notice dated 15.4.2005 for inviting tenders from flour mills registered with MG ASG HQ Northern Command for lifting of wheat from FCI Depots, grinding into atta, purchase of bran, refraction and used wheat bags, transportation of atta and bran by road transport to nominated Military Stations in J&K;, Pathankot & Kangra Valley from 01. Aug 05 (or from the date of sanction) to 31.7.2006. Clause 6 of the tender notice envisages that successful tenderer will be required to follow terms and conditions laid down in tender form & MOU. The tenders were for the contracts relating to 14 Corps, 16 Corps, 15 Corps and K.V. Depots. In response for three contracts for 16 Corps, 15 Corps and K.V. Depots five registered flourmills including that of the petitioner submitted their tenders and thereby quoted their rates. The tenders were opened on 5.5.2005; comparative statement of the rates quoted by them was prepared by the respondents, which form part of the reply as annexure 3, 4 & 5 to reply affidavit. Admittedly the bid of the petitioner was found to be lowest (L1) for 16 corps, the bid of respondent No. 6 was found to be second lowest (L2) and that of Kash-Ind. Was found 3rd lowest (L3). For 15 Corps the rates quoted by respondent No. 6 were found to be lowest (L1) while that of the petitioner were found to be 2nd lowest (L2) and that of Kash-Ind. Were found 3rd lowest (L3). For the third contract for KV Depots the bid of the petitioner was lowest (L1) while firm Kash-Ind was 2nd lowest (L2) and respondent No. 6 was 3rd lowest (L3). ',
	(int) 2 => '<p>2. The respondents have allowed the contract for 16 Corps and 15 Corps to respondent No. 6 whereas third contract for KV Depot has been allotted in favour of firm Kash-Ind. The bid of the petitioner for all the three contracts has been rejected. The petitioner through this petition and supplementary affidavit has questioned the allotment of three contracts but for the reason that the firm Kash-Ind to whom third contract for KV Depots has been allotted has not been impleaded as respondent in this petition, as such learned Counsel for the petitioner has foregone his challenge and restricted it only to the two contracts i.e. 15 & 16 Corps allotted in favour of respondent No. 6. ',
	(int) 3 => '<p>3. Mr. Goni, learned Counsel for the petitioner contends that the rates quoted by the petitioner for the contract for 16 Corps were lowest yet his tender has been rejected and inspite of the fact that the rates quoted by respondent No. 6 were admittedly more than the rates quoted by the petitioner, contract has been allotted in his favour. Mr. Goni further contends that even allotment of the contract of 15 corps in favour of respondent No. 6 is bad because of the fact that his rates which have been found to be lowest in comparison to the rates quoted by him, should not have been accepted being fraudulent and unreasonable. In order to explain his point Mr. Goni pointed out that for transportation of atta from the mill to Srinagar respondent No. 6 has quoted Rs. 829/- against the petitioner's rate of Rs. 850/-. For the destination of Gulmarg the rate quoted by respondent No. 6 is Rs. 475/-whereas the rate quoted by the petitioner is Rs. 956/- and similarly for Tangdar respondent No. 6 quoted Rs. 751/- as against Rs. 970/- quoted by the petitioner. Mr. Goni submits that it is inconceivable as to how rate of Rs. 475/- and 751/- for the destination of Gulmarg and Tangdar can be reasonable when the rate quoted and accepted for Srinagar is Rs. 829/-as the destination of Gulmarg and Tangdar are indisputedly at more distance than Srinagar. How can the rates quoted by respondent No. 6 for Gulmarg and Tangdar can be treated as reasonable. He argues that the rates quoted by the petitioner for both the contracts being lowest and reasonable deserved to be accepted by the respondents and contracts should have been allotted to the petitioner. But in order to confer undue benefit upon respondent No. 6 the rates quoted by him have been arbitrarily found to be reasonable. Arbitrary and unreasonable action of the respondents of allotting the contracts in favour of respondent No. 6 cannot be legally sustained. He submits that the allotment of respondent No. 6 for the contracts of 15 & 16 Corps should be quashed and respondents be directed to allot the contracts in favour of the petitioner. ',
	(int) 4 => '<p>4. The stand of the respondent in the reply filed is that tenders were opened and the rates quoted by the tenderers were announced in presence of all the tenderers by the Board of Officers, specially empowered vide HQ 71 Sub Area (Stn) HQ Cell) letter No. 78/14/Q(D)Stn Cell dated 20.12.2004 and comparative statement as per the procedure and orders on the subject were prepared. He further submits that as per instructions regarding contracts, the successful tenderer is one which is not declared 'fictitious' by panel of officers in terms of para 74 of govt. of India, Ministry of Defence letter No. PC/Raksha/68063/Q/ST5/5089/D(QS) dated 22.11.2000 which provides that in case rates quoted are lower than 20% of RR the same shall be treated as fictitious and rejected by the panel of officers. It is the further stand of the respondents that the panel of officers after examination of the rates quoted by the petitioner declared the same as fictitious for contracts pertaining to 16 Corps and KV Depots as per para 74 (supra) and therefore his tenders have been rejected. As regards contract for 15 Corps it has been submitted that since the petitioner was not lowest tenderer therefore he has not been allotted the contract. ',
	(int) 5 => '<p>5. Mr. Magoo, learned Additional Solicitor General of India, appearing on behalf of the respondents, has argued that the rates quoted by the petitioner were examined by the panel of officers in the light of RR (reasonable rates) calculated and fixed in terms of para 61 to 63 of the Policy of Government of India formulated regarding the procedure for conclusion of ASC contracts for fresh supplies. As the rates quoted by the petitioner were found to be unreasonable in terms of para 74 of the policy, his tenders were rejected. ',
	(int) 6 => '<p>6. The bids of the petitioner for the said three contracts as per the stand of the respondents thus stands rejected in terms of para 74 of the aforesaid policy. Para 74 reads as follows: ',
	(int) 7 => '<p>In case rates quoted are lower than 20% of RR the same will be treated as fictious and rejected by panel of officers. Action should be taken against such tenders, as per the prescribed procedure. However the decision to reject such tenders may be taken by the panel only after discussion with tenderer and reasons for rejection/acceptance should be recorded in panel proceedings.',
	(int) 8 => '<p>7. How the RR (reasonable rate) is to be calculated the procedure is contained in paras 61 to 63,which read as under: ',
	(int) 9 => '<p>61. The following data will be used for determining RRs. ',
	(int) 10 => '<p>(a) Average of contract rates of last 3 years and average inflation during the last 2 years on the basis of wholesale price indices published by Ministry of Industries; ',
	(int) 11 => '<p>(b) Average of retail rates (published by Ministry of Agriculture) of particular stations or for nearby stations of last 123 months reduced by a pre-determined depression factor (which should normally be not less than 30% for converting retail rates into whole sale rate. ALMR (Average Local Market Rate) complies as per para 49 will be used as retail rates at station for which the statistical rates )SR) is not published by Ministry of Agriculture; ',
	(int) 12 => '<p>(c) Special factor affecting meat prices such as export demand, natural calamities in certain regions, statutory levies imposed by the Government should also to be taken into account and the RRs calculated as per sub para 61 (a) & 61(b) above suitably amended. Extent of weightage given should be compiled carefully based on authenticated and reliable data/information. The effort should be to arrive at a realistic RR taking into account the various relevant factors affecting contract rates at a station. ',
	(int) 13 => '<p>62. Based on information made available by the panel of officers whose composition is given in para 68 below will deliberate on the above details and arrive at 'reasonable rates' for each items and stations. The Reasonable Rates to be arrived at will be in terms of the percentage increase/decrease over the CCR in case of all other items. The information about formulation of reasonable rates will be closely guarded secret and will under no circumstances be divulged to persons other than panel of officers. To maintain sanctity of the rates the panel of officers will work out reasonable rates on the same date and time when the tenders for those items/stations are being opened. In case there is a difference of opinion in the panel of officers regarding fixation of RR the matter will be referred to the CFA for a final decision. ',
	(int) 14 => '<p>63. The reasonable rates once determined will be put down in writing and signed by the panel of officers and will be kept in a sealed cover. No change will be made to those rates there after. Those rates will then be attached to the CST for perusal y the sanctioning authorities. Normally RR once fixed will not be revised. However, if revision of RR has to be done because of unavoidable reasons, detailed justification will be given in the panel proceedings.',
	(int) 15 => '<p>8. It is manifest from the bare reading para 61 that one of the factors for determining RR (reasonable rates) is average of contract rates of last three years and average inflation during the last two years on the basis of wholesale price indices published by Ministry of Industries to be taken into consideration by the panel of officers detailed with duty to work out the RR (reasonable rates). The record which was placed before the panel of officers for determining RR has been produced for perusal of the court by Mr. Magoo learned A.S.G. ',
	(int) 16 => '<p>9. For working out the average rate on the basis of last three contracts details of the rates quoted for the contracts for the year 1999-2001, 2001-2003 and 2003-2005 which were submitted to the panel of officers constituted for determining RR included the rates quoted during the said years for collection of wheat and grinding of wheat which were as follows: ',
	(int) 17 => '<p>Serial Articles/ Qty Rates',
	(int) 18 => '<p> Service',
	(int) 19 => '<p> 1999-01 2001-03 2003-05 Average of Last 03',
	(int) 20 => '<p> Contra-cts<p>(A) Rates for Supply of the following:',
	(int) 21 => '<p>1. Collection 1,797 140.00 129.50 150.00 139.83',
	(int) 22 => '<p> of wheat',
	(int) 23 => '<p>2. Grinding of 1,770 187.50 169.00 249.50 202.00',
	(int) 24 => '<p> wheat',
	(int) 25 => '<p> Average 163.75 149.25 199.75 170.92<p>10. Mr. Goni when was informed about the rates submitted from the record during the course of arguments took up a stand that record submitted is not based upon correct rates accepted for the contracts for the above said years. According to him the contract for the year 2001-2003 was allotted on the basis of the rates for grinding of wheat at Rs. 119/- and not 169/-. He submitted that the respondents submitted wrong rates before the panel; therefore RR calculated cannot be accepted under law to be the rates correctly worked out. He argued that respondents deliberately submitted wrong figures to the panel so as to see that rates quoted by the petitioner are declared unreasonable. On this Mr. Magoo, learned ASG was called upon to verify the fact from record of the contracts allotted during those years. Mr. Magoo after verification of record submitted another statement containing details of rates for the contracts for the years 1999-2001,2001-2003 and 2003-2005 which according to him reflects correct position as per record of contracts. In this statement the rates indicated for grinding of wheat for the contract of 2001-2003 is Rs. 119.50 whereas rate submitted to the panel of officers has been Rs. 169.00. It has thus been admitted by the respondents that RR worked out by the panel of officers was based upon wrong figure of the rate regarding grinding of wheat for the year 2001-2003. It cannot thus be disputed and rather is not being disputed by learned Counsel for the respondents that RR worked out is erroneous being based upon consideration of wrong rate for one of the contracts for the last three years. Mr. Magoo was pointedly asked as to how much this error of quoting wrong rate could have affected the actual RR rate if worked out by the panel of officers by taking the correct one i.e. Rs. 119.50 in place of Rs. 169.00 and as to what should have been correct RR. He fairly conceded that he or the respondents are not in a position to work out correct RR by taking into consideration correct figure for the reason that for that the thought process of the panel of officers which determined RR rates would have to be analyzed as it cannot be said as to what weightage the panel had given to the rates for the last three years which cannot be done. In this view of the position it is manifest and cannot be disputed that RR fixed by the panel has not been correctly worked out on the basis of actual rates of contracts for the last three preceding years. Mr. Magoo however submits that the error in calculation of RR was only negligible and should be ignored. According to him the State must have freedom of contract. It can take its own decision for deciding as to who would be the best person out of different contestants to be capable of performing the contract. The State can even reject the tender of lowest bidder if it is of the opinion that such lowest tenders would not be able to perform the contract to its satisfaction. The decision of the State of awarding a contract, according to him, is not open to judicial review. ',
	(int) 26 => '<p>11. I am not in agreement with Mr. Magoo. No doubt the award of contract by State is a commercial transaction and like a private party State can also choose its own method and terms to arrive at a decision with regard to grant of a contract. The State must have freedom of contract but the only distinction between private party and State for the purpose of awarding of contract is that the decision of a private party is not open to judicial scrutiny in writ jurisdiction but the decision of the State can be tested by the court to see whether it meets the standard of reasonableness and is free from arbitrariness, not effected by bias or actuated by malafide, meaning thereby that the decision by itself is not open to judicial scrutiny but the process by which such a decision has been arrived at can be examined by the court to rule out arbitrariness, mala fide or bias or unreasonableness and it can interfere with it if it is found vitiated by mala fide, arbitrariness and unreasonableness. The State in exercise of its administrative power can prescribe criteria for eligibility for awarding of a contract and if it does so then it is bound to follow the criteria strictly for deciding as to whether a bidder/tenderer is eligible for award of a contract. In the present case admittedly Govt. of India has formulated a policy as to how the rates quoted for such a contract are to be assessed. It has been laid down in the policy that rates quoted have to be compared with RR and if the quoted rates are found lower than 20% of RR same will be treated as fictitious and rejected by the panel of officers. It is admitted case of the respondents that the rates quoted by the petitioner were found to be lowest than 20% of RR and therefore deserved rejection. RR rate for having been not correctly worked out rejection of the rates quoted by the petitioner on the basis of comparison with RR rates wrongly worked out leads to only one inference that the rates of the petitioner have unreasonably been rejected and on the same reasoning acceptance of the rates of respondent No. 6 cannot be held to be reasonable. As the respondents have formulated a policy for assessing reasonableness of rates quoted by tenderer the respondents are bound to follow the policy scrupulously. Non-observance of policy advertently or inadvertently for taking a decision of allotment of a contract makes the decision unsustainable. In Air India Ltd. v. Cochin International Airport Ltd. : [2000]1SCR505 , the Supreme Court observed as follows: ',
	(int) 27 => '<p>The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at commercial decision considerations that are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept he offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms; standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.',
	(int) 28 => '<p>12. Similarly in Tata Cellular v. Union of India : AIR1996SC11 their lordships observed: ',
	(int) 29 => '<p>The principle of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, 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.',
	(int) 30 => '<p>13. Their lordships while holding that judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself observed as follows: ',
	(int) 31 => '<p>The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by Government bodies are: ',
	(int) 32 => '<p>(1) The modern trend points to judicial restraints in administrative action; ',
	(int) 33 => '<p>(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made; ',
	(int) 34 => '<p>(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible; ',
	(int) 35 => '<p>(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts; ',
	(int) 36 => '<p>(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides; ',
	(int) 37 => '<p>(6) Quashing decisions may impose heavy administrative burden on administration and lead to increased and unbudgeted expenditure. ',
	(int) 38 => '<p>14. It is thus authoritatively settled that judicial review is permissible with regard to examining the legality of decision making process regarding awarding a contract by the Government. Though the Government has freedom of contract, a fair play in the joints is necessary concomitant for an administrative body functioning in the administrative sphere. However, the decision of the Government of awarding a contract in order to be sustainable in the eyes of law has to stand the test of Wednesbury's principle of reasonableness and must be free from arbitrariness, not affected by bias or actuated by mala fides. Whenever the method for granting Government contracts by inviting tenders is adopted a tenderer whose bid of rates is lowest is entitled to the grant of the contract as a rule which is subject to an exception that the Government for sound reasons considers that he would not be in a position to execute the contract. If the Government takes such a decision then such decision to be valid is required to stand the test of reasonableness and must be free from arbitrariness, mala fide and favourtism. ',
	(int) 39 => '<p>15. The decision of the respondents to award contracts in favour of respondent No. 6 in the facts and circumstances of the case cannot stand the test of reasonableness. ',
	(int) 40 => '<p>16. The tender of the petitioner has been rejected simply on the ground that the rates quoted by him are fictitious. The rates have been said to be fictitious because they have not stood the test of reasonableness when compared with ER. Once the fixation of RR is found faulty then the very basis for holding the rates of the petitioner fictitious stands knocked out. Since the RR has come to be fixed erroneously therefore rejection of the tenders of the petitioner is rendered unsustainable in the eye of law. ',
	(int) 41 => '<p>17. Mr. Parihar, learned Counsel appearing on behalf of respondent No. 6 submits that on the basis of same RR (reasonable rate) respondents considered the question of allotment of three contracts, the petitioner is maintaining challenge to the allotment of only two contracts which have been allotted in favour of respondent No. 6, meaning thereby that the petitioner is accepting the correctness of the fixation of RR as well as allotment as valid with regard to the third contract, such a self-contradictory plea cannot be allowed to be maintained by the petitioner. He further submitted that under law court is not empowered to quash a contract in piecemeal. ',
	(int) 42 => '<p>18. There is no merit in the contention of Mr. Parihar. All the three contracts are separate contracts and the process adopted for allotment of three separate contracts can be made subject matter of judicial review independently. Since the petitioner has laid a challenge to the allotment of two contracts allotted in favour of respondent No. 6, therefore, process of decision making with regard to allotment of these two contracts can be subjected to judicial review. For maintaining a challenge to these two contracts it is not necessary for the petitioner to challenge the allotment of third contract as well. ',
	(int) 43 => '<p>19. In the last it has also been contended by Mr. Magoo, learned A.S.G. that the respondents are ready to get the RR rates calculated afresh by panel of officers on the basis of actual rates of the three preceding contracts in terms of the policy formulated in this behalf and thereafter to take fresh decision regarding allotment of contracts for 15 & 16 Corps. ',
	(int) 44 => '<p>20. Be it so, for the reasons quoted above the writ petition of the petitioner merits to be allowed. Ordered accordingly. The allotment of the contracts made in favour of respondent No. 6 regarding 15 Corps and 16 Corps pursuant to the tender notice dated 15.4.2005 is quashed. Respondents may get the RR (reasonable rates) worked out afresh by strictly adhering to policy formulated in this behalf and thereafter take fresh decision regarding allotment of the said contracts, after examining the bids of all the tenderers, including the petitioner submitted in response to the aforesaid tender notice. Connected CMPs shall also stand disposed of. <p>',
	(int) 45 => '<p>'
)
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Subject	Contract
Court	Jammu and Kashmir High Court
Decided On	Aug-10-2005
Case Number	OWP 428/2005
Judge	Y.P. Nargotra, J.
Reported in	2006(3)JKJ627
Acts	Constitution of India - Article 14
Appellant	Vaishno Flour Mills
Respondent	Union of India (Uoi) and ors.
Appellant Advocate	M.A. Goni, Sr. Adv. and; M.A. Bhat, Adv.
Respondent Advocate	V.K. Magoo, ASG and; Ashok Parihar, Adv.
Disposition	Petition allowed
Cases Referred	Tata Cellular v. Union of India

Vaishno Flour Mills Vs. Union of India (Uoi) and ors. - Court Judgment