M.N. Shukla, J.
1. This writ petition raises some constitutional and legal questions of considerable importance. The phenomenon has been noticed by jurists as well as Courts which have had occasion to decide such matters, that the ramifications of governmental functions and State activities in this era of welfare State are fast expanding. A necessary concomitant of this is the anxiety to keep the State within bounds and not permit it in the course of its stride to ride rough shod over certain well established guarantees and safeguards enjoyed by the people. This has resulted, inter alia, in importing some salutary inhibitions even in the realm of administrative law which until sometime ago was regarded as comparatively immune from constitutional restraints. The development of this aspect of law is clearly revealed in cases where the State indulges in such activities as carrying on business, making of a contract etc., functions which are undertaken by the State obviously in the exercise of its statutory or executive authority.
2. The instant case arises out of a contest between rival tenderers for supplying medicines to the Swarup Rani Nehru Hospital, Allahabad (hereinafter described as the hospital). Tenders were invited for supplying medicines to the Hospital for the year 1980-81. An advertisement was inserted in the newspaper on 5-3-1980 & 7-3-1980, saying that the last date for submitting the tenders was 20th of March 1980, till 11.30 A.M. and that all the tenders offered would be opened at 3 P.M. on the same day. It is significant that the advertisement also said that full particulars could be obtained from the office of the Senior Medical Superintendent of the hospital. A copy of the notice of tender was affixed on the Notice Board of the office of the Senior Medical Superintendent. It has been filed as Annexure-I to the writ petition and is the bed-rock of the petitioner's entire case. It is not disputed that the conditions of the tender have been incorporated in this notice. A perusal of the same would indicate that a tenderer who intends to submit his tender must satisfy certain objective tests:--
(i) The tenderer in medicine must have a local medical shop.
(ii) He must be a registered and licenced drug dealer and must produce proof of the same along with the tender of medicines.
(iii) Only those who hold licence for all drugs including dangerous drugs should submit tender for medicines (it may be noted that the requirements about holding a licence for dangerous drugs was not enforced.) and (iv) Tenders would be opened in the office of the Senior Medical Superintendent on 20th March 1980, at 3 P. M. in the presence of such tenderers of their authorised representatives, who may choose to attend. Tenders for supply of drugs will be accepted from registered and licenced drugs dealers only, who also hold licence for dangerous drugs and they must produce proof of the same.
3. The petitioner as well as opposite party No. 3, namely, M/s. National Medical Stores, Fatehpur submitted their tenders within the date prescribed. While the rate quoted by the petitioner in their tender was 17.6% the rate quoted by the opposite party No. 3 was 8.62 per cent. The tenders were opened on 20th March 1980 and according to the allegations of the petitioner the tender submitted by him was orally accepted and he was directed to supply the medicines to the hospital with effect from 1st of April, 1980. However, on 16th July, 1980, the petitioner received a letter from respondent No. 2, the Senior Medical Superintendent to the effect that the contract of medicines had been finalised and another contractor, i.e., opposite party No. 3, had been appointed for the supply of medicines for the year 1980-81 and he would start supplying the medicines to the hospital with effect from 19th April 1980. The petitioner supplied medicines only upto July 1980, and not thereafter. It was alleged that the petitioner satisfied all the conditions of the notice of the tender, and the opposite party No. 3 was not eligible to submit the tender as he did not satisfy the aforesaid conditions and consequently the decision of the respondent No. 2, in accepting the tender of opposite party No. 3 was arbitrary, discriminatory and based on extraneous and irrelevant considerations.
4. The writ petition was resisted by the State as well as respondent No. 3. In short, the defence was that the process of inviting tenders and laying down conditions for submitting the tenders and ultimately accepting or rejecting any one of them was essentially an administrative function, that the conditions could according to the exigencies of the situation be relaxed without the action being vitiated on that account, and that the alleged disqualification attributed by the petitioner to the opposite party No. 3 was illusory. It was also contended that at all events this was not a fit case in which this Court should interfere under Article 226 as the inevitable result of allowing the petition would be to compel the hospital to pay higher price for the supply of medicines and this would entail a financial burden.
5. The question, therefore, which arises for decision is as to whether the tender of respondent No. 3 was not eligible and whether the action of the respondent No. 2 in accepting such tender was arbitrary and illegal and liable to be quashed. It was not disputed that on the crucial date i.e., 20th March, 1980, which was the last date for submitting the tenders and also on which date the tenders were to be opened, the opposite party No. 3 did not possess a local shop at Allahabad and they did not even hold a licence for supply of drugs in respect of the town of Allahabad. They did hold a licence but that related to the city of Fatehpur and they actually secured the requisite licence for the city of Allahabad on 30th June, 1980. It was faintly suggested on behalf of the State that the provision in the notice of tender (Annexure 'I') about having a local shop was not actually a condition of eligibility and that there would be substantial compliance of the requirements incorporated in that document even if at the time of the commencement of the actual supply of medicines the tenderer did possess a local shop. We are unable to accede to this submission. On a careful perusal of the entire document we are convinced that Annexure-I incorporates the essential conditions for receiving and accepting or rejecting the tenders. It contains what is known in legal parlance as the norms of eligibility. It would be fantastic to suggest that the supply of medicines should be entrusted to a person who does not possess a local shop in the town for which the tenders were invited. It was, therefore, a condition precedent to the submitting of a tender that the tenderer must possess a local shop. In the alternative it was argued that the condition would be satisfied even if before the final acceptance of the tender, the tenderer had obtained a local shop. This contention is untenable because the relevant point of time on which the fulfilment of the conditions had to be seen is the date of submitting the tender. A subsequent improvement in the position of a tenderer or his later endeavour to cure the disqualifications from which he suffered at the time of the presentation of his tender would not confer on him any right to submit a fresh tender afterwards or regularise his tender already submitted. This position appears to be consistent with the tenor of the numerous conditions set out in Annexure-I,
6. The point would be borne out more clearly when we proceed to examine the second requirement which was also found lacking in the opposite party no 3, i.e., he did not possess a licence for the sale of drugs on 20th Mar. 1980. It was vehemently urged on behalf of the respondent that on a proper construction the condition contained in the notice of tender would mean that the tenderer must possess a licence for the sale of drugs before he is permitted to start the supply of medicines. This contention must be repelled as it is incompatible with the categorical condition embodied in the notice of tender namely, 'only those who hold licence for all drugs including dangerous drugs should submit tender for medicines.' The requirement is unequivocal and completely eliminates tenders of persons who do not possess on the date of submitting the tender a licence for sale of drugs. Here also the relevant date is the date till which the tenders could be submitted. If the tenderer is bereft of a licence on that crucial date hut subsequently obtains a licence with respect to the town in question, his tender would not be validated by such act. Thus, two important conditions of tender incorporated in the notice of tender were clearly violated by respondent No. 2 in accepting the tender of the opposite party No. 3.
7. The legal question, therefore, which now arises is as to whether acceptance of a tender in violation of the standard or norms of eligibility set out in the notice of tender would be valid or otherwise. As we observed in the earlier part of our judgment, this is a field of activity of the State which has been judicially examined and certain principles have crystallised in the course of judicial pronouncements. Perhaps a conservative approach to the problem would suggest that conditions such as those which are commonly prescribed for inviting tenders have no statutory force and are at best administrative instructions. Hence, departure from the same may entitle the Government to take action against its own delinquent officers or agents but it would not render the tender itself illegal. The trend of recent decisions, however, has been radically different and the underlying reasons stem principally from the grave danger inherent in the situation where the same rules govern the rights of persons placed in the same category and yet the State is permitted to apply one condition or restraint to one individual but at its will waive it in the case of another belonging to the same class. This would be a flagrant breach of the provisions of Article 14 of the Constitution and would result in invidious discrimination. Since the functions of the State have multiplied enormously, the ambit of rule of law has also been enlarged. It has become necessary that the ubiquitous authority of the State manifested in myriad fields must also be subject to limitations. Consequently, even in the realm of administrative action some safeguards and restraints have been evolved by the Courts and infringement of the same has been construed as rendering the action void. The Supreme Court in recent cases has clearly enunciated the dictum that the Government as well as any instrumentality or agency of Government, would, in the exercise of its power or discretion be subject to certain limitations, inhibiting arbitrary action on its part. The case of Ramana v. I. A. Authority of India, AIR 1979 SC 1628, was a case of tenderers in which the tender notice stated in clear terms that 'sealed tenders in the prescribed form are hereby invited from Registered IInd Class 'Hoteliers having at least 5 years' experience for putting up and running a IInd Class Restaurant and two Snack Bars at this Airport for a period of 3 years.' One of the tenderers failed to satisfy the condition inasmuch as he was not registered IInd Class Hotelier having five years experience and it was held that such tender was not eligible. Bhagwati, J., speaking for the Court observed in paragraph 34 :
'It is, therefore; obvious that both having regard to the constitutional mandate of Article 14 as also the judicially evolved rule of administrative law, the 1st respondent, was not entitled to act arbitrarily in accepting the tender of the 4th respondents, but was bound to conform to the standard or norm laid down in paragraph 1 of the notice inviting tenders which required that only a person running a registered IInd Class hotel or restaurant and having at least 5 years' experience as such should be eligible to tender'.
The conclusion was stated in these words:
'The action of the 1st respondent in accepting the tender of the 4th respondents, even though they did not satisfy the prescribed condition of eligibility, was clearly discriminatory, since it excluded other persons similarly situate from tendering for the contract and it was also arbitrary and without reason. The acceptance of the tender of the 4th respondents was, in the circumstances invalid as being violative of the equality clause of the Constitution as also of the rule of administrative law inhibiting arbitrary action'.
8. Another decision which contains an extension of the same dectrine is reported in AIR 1980 SC 1992, M/s. Kasturi Lal v. State of J & K. The dictum enunciated in that case was:
'Where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largess, the Government cannot act arbitrarily at its sweet will. There are two limitations imposed by law which structure and control the discretion of the Government in this behalf. The first is in regard to the terms on which largess may be granted and the other, in regard to the persons who may be recipients of such largess. Unlike a private individual, the State cannot act as it pleases in the matter of giving largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion.' (Head note).
That a pervasive vigilance over the actions of the Government is desirable in order to preserve the frontiers of legality is apparent from the following observations:
'Every activity of the Government has a public element in it and it must therefore be informed with reason and guided by public interest. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interests and if it fails to satisfy either test, it would be unconsitutional and invalid'. (Ibid).
9. We feel that there are certain immutable principles of justice which inhere in the very idea of Government. What is Government after all except a body of free persons invited together for their common benefit, to enjoy peaceably what is their own, and to do justice to others The standard of rectitude expected of the State in its dealings with the citizens was highlighted by Sutherland in emphatic terms; 'The moral duty of a state to keep its word, in spirit as well as in letter, is no less than that of an individual' (Pacific Co. v. Johnson, (1931) 285 US 480, 501) and not less rigorous is the course of conduct prescribed for the State in another American decision: 'We naturally look to the action of a soveriegn state, to be characterised by a more scrupulous regard to justice, and a higher morality, than belong to the ordinary transactions of individuals'. (Meloan : Woodruff : Trapnell, to How, (51 U.C.) 190, 207).
10. It is well established that the term 'State' occurring in Article 12 of the Constitution has a wide import and embraces public authorities and other instrumentalities or agencies through which the Government exercise its activities. In the instant case an averment was made in the writ petition that the Swarup Rani Nehru Hospital, Allahabad, was run and maintained by the State of U. P. and the Senior Medicial Superintendent, respondent No. 2, was an employee of the State of U. P., who is authorised to manage and maintain the affairs and expenditure of the hospital. It was further said that the Senior Medical Superintendent was authorised by the State of U. P., to enter into a contract and to invite tenders for the maintainance and other affairs of the hospital. These assertions were not controverted in the counter affidavit. Consequently, the respondent No. 2 was bound to conform to the conditions of eligibility embodied in the notice of tender.
11. Applying the test culled from the cases to which we had referred we are satisfied that the respondent No. 3 was not qualified to submit the tender. Since they did not satisfy two important conditions of eligibility laid down in Annexure I of the writ petition, their tender should have been excluded from consideration. It was contended by Shri T. P. Asthana, the learned Standing Counsel that the facts of the instant case fully satisfied the dictum in Kasturi Lal's case inasmuch as the rate for a supply quoted by the opposite party No. 3 was nearly half of the rate quoted by the petitioner, and consequently on the touchstone of 'reasonableness and public interest' the respondent No. 3 was entitled to take precedence over the petitioner. This argument is attractive but fallacious. The two cases to which we have adverted, namely, Ramanna AIR 1979 SC 1628 and Kasturi Lal, AIR 1980 SC 1992 cover two different fields. The former lays down that Govt. or its agencies or instrumentalities are not immune even in their administrative action from the mandate of Article 14, and, therefore, where there is infringement of the equality clause, such action must be held to be invalid. On the other hand, Kasturi Lal's case deals with the situation where even though parties may be equally situate and may both be eligible for consideration, yet one of them may be discarded on the ground of being unable to satisfy the test of reasonableness and public interest. Hence, the two principles have different areas of applicability and the latter criterion cannot replace the former. There may be cases in which both vices may be shared by a single act but a discriminatory action cannot be upheld by substituting the test of reasonableness and public interest for the imperative mandate of equality enshrined in Article 14 of the Constitution. Thus, there is no manner of doubt that the action of respondent No. 2 in accepting the tender of the opposite party No. 3 was arbitrary, violative of the equality clause and invalid.
12. The impugned order dated July 15, 1980, (Annexure '2') passed by the respondent No. 2, cannot, therefore be sustained. We accordingly quash the same and allow the writ petition with costs. We want to make it clear that Annexure '2' of the writ petition is merely an intimation to the petitioner of the substantive order accepting the tender of the opposite party No. 3, That order was filed as Annexure 'D' to the counter affidavit of the contesting party. In the interest of justice we quash the aforesaid order dated Apr. 17, 1980, also.
13. After we had completed the judgment an oral application was made by the learned counsel appearing for the respondent No. 3, as well as the Standing counsel appearing for the State that a certificate of fitness for appeal to the Supreme Court be granted. The learned counsel has, however, failed to satisfy us that the case involves any substantial question of law of general importance which needs to be decided by the Supreme Court. In fact, we have mainly followed the two decisions of the Supreme Court referred to in our judgment. As such there is no force in this prayer. It is accordingly rejected.