K.S. Varma, J.
1. In order to appreciate the controversy giving rise to these petitions certain facts will have to be stated in some detail. The State of U. P. through opposite party No. 2 invited tenders for collection of Sal Seeds from 14 Forest Divisions of U. P. enumerated in tender notice, Annexure 1 to the writ petition. In pursuance of the tender notice, the petitioners submitted their tender for several Divisions within the time fixed i.e. 20th April, 1981. The date of the opening of the tender was 21st April, 1981. On that date the tenders could not be opened as this Court passed an order in Writ Petn. No. 1838 of 1981, Hind Trading Company v. State of U. P. and in Writ Petn. No. 1897 of 1981, Oudh Sugar Mills Ltd. v. State of U. P. (reported in 1982 All U 572), staying the reopening of the tenders by the State of U. P. By a subsequent order dated 27-4-1981 this Court clarified the said order and allowed the opening of the tenders. The order, however, provided that until further orders the State of U. P. shall not accept any tenders. A copy of the said order passed by this Court is Annexure 2 to the Writ petition. In compliance of the order passed by this Court the State of U. P. opened the tenders on 28-4-1981. For two Forest Divisions the petitioners' tender were highest. These Forest Divisions are South Pilibhit and South Kheri. On account of the stay order, the opposite parties did not take any steps to issue the letter of acceptance for collection of the Sal Seeds for three years even for these Forest Divisions which were not in dispute in the writ petitions referred to above. The petitioners intervened in the writ petitions as opposite parties and they prayed that since the period of operation for collection of Sal Seeds is very short i. e. from 1st April to 15th June, the petitions be finally disposed of. By order dated 15-5-1981 the aforesaid writ petitions were dismissed. In the year 1977 tenders were invited for the collection of Sal Seeds for a period of four years and the petitioners in those writ petitions prayed that having regard to the assurance given by the State Government that the lease may be extended up to 15 years, the lease in favour of the petitioners be extended. This argument was repelled by the Division Bench and while disposing of the writ petitions, the Division Bench observed that for the year 1981 onwards the State Government had taken a decision that the work of collection of Sal Seeds be given to the Forest Corporation if they were ready to do so without any special increase in staff and in the remaining areas the work of collection of Sal Seeds be given on lease for three years for which tenders be invited. It was also observed by the Division Bench that the decision to invite tenders for a period of three years was in the circumstances neither arbitrary nor unreasonable but in public interest. It was also observed that the decision to invite fresh tenders for three years was neither hit by Article 14 of the Constitution nor by principles of natural justice. After the decision rendered by the Division Bench on 15-5-1981, the petitioners approached opposite party No. 2 and requested him to give a letter of acceptance. Opposite party No. 2, however, declined to give any letter of acceptance, he, however, told the petitioners that final decision will be taken by opposite party No. 1. The petitioners requested that an early decision in the matter may be taken. The petitioner was called by opposite party No. 2 on 20-5-1981. The petitioner contacted the Forest Secretary as well as State Minister for Forests. The petitioner was informed that with regard to the collection of Sal Seeds, the petitioner may contact the Chief Conservator of Forests. When the petitioner approached opposite party No. 2 the latter pressurized the petitioners to surrender the North and South Gorakhpur and east and west of Bahraich Division even though the petitioners' tenders were highest. The petitioners did not agree to these suggestions. The petitioners then submitted the letter dated 20-5-1981, a copy of which is Annex 5 to the writ petition. In the said letter, it was stated that after the decision in Writ Petitions Nos. 1838 and 1897 of 1981, the aggrieved parties approached the Supreme Court which rejected the application for Special leave to appeal to the Supreme Court and the judgment of High Court was confirmed. The petitioners, in these circumstances, prayed that they may be permitted to start the work of collection of Sal Seeds in the above Divisions. The petitioners' request remained unheeded and another request was made to the opposite parties by means of Annexure 7 to the petition that the petitioners be permitted to start the work.
2. On 22-5-1981 the petitioners contacted the Forests Secretary on telephone and sought his permission to discuss the matter with him personally. In para 12 of the writ petition it has been stated by the petitioner that the Forest Secretary told the petitioner that whatever Forest Divisions have been given to the petitioner, he should remain contented with them and no useful purpose will be served by making efforts for other divisions as the Government had already taken the decision to give the letter of acceptance to other tenderers and will issue the same on 23-5-1981. The grievance in the petition is that the petitioners are the highest bidders and for no ostensible reason the opposite parties were trying to give tender to other persons whose bid was not as high as that of the petitioners. The petitioners' case is that they have come to know that the opposite parties were not taking any steps to accept the petitioners' bid on account of political influence exercised on the said opposite parties by the proprietors of the Hind Trading Co. and Oudh Sugar Mills Ltd. who were litigating for the grant of lease for 11 years and who do not want that the said divisions go out of their hands. The petitioners maintain that although their bid is the highest, the matter of grant of contract has been delayed. The petitioners are ready to deposit the requisite amount and to enter into the agreement. Their further contention is that since the petitioners' bid is the highest, they have a legitimate right to compel the opposite parties to allow them to start the work for collection of Sal Seeds. The inaction of the opposite parties in not granting the contract to the petitioners is an arbitrary action which is likely to cause irreparable loss which cannot be compensated in terms of money. According to the petitioners the activities of the Government have a public element and, therefore, there should be fairness and equality if the State enters into contract with private parties. In doing so, the State is required to act fairly and without discrimination. It is further contended by the petitioners that once the decision was taken by the State Government to lease out the forest ranges for collection of Sal Seeds by public auction, the Government cannot reject the highest tenders except when it finds that the offer is inadequate or there are justifying circumstances for not accepting the highest bid. Since the petitioners' bid happens to be the highest and the opposite parties have not disclosed any reason why the highest bid should not be accepted, there is no legal justification for the opposite parties for not accepting the bid of the petitioners. It is also contended by the petitioners that the work of collection of Sal Seeds starts each year in the month of April and lasts till the month of June when the monsoon starts and if the petitioners are not allowed to start the work, they would suffer irreparable loss.
3. On 27-5-1981 at about 4 P.M. the petitioners' representative Shri Y. K. Nathani was served with a notice relating to reauction of South Kheri, East Bahraich and West Bahraich Ranges. The reauction was to be held on 30-5-1981. A perusal of Annex. 8 to the petition, the notice, will indicate that on 30-5-1981 the auction was to be held at 11 A.M. and the highest bidder was required to deposit 10% of the total amount of the highest bid. From a perusal of Annex. 8 to the petition, it appears that the opposite parties were not prepared to accept the tender of the petitioners for South Kheri Range and that of Balaji Enterprizes for East Bahraich and West Bahraich Ranges. The case of the petitioners in respect of these ranges is that the decision not to accept the highest tenders was arbitrary, unreasonable and mala fide. The highest tender for South Kheri Range was of the petitioners for Rs. 17,73,000/- while the highest tenders for East and West Bahraich Ranges were of Balaji Enterprizes for Rs. 1,68,000/-and Rs. 52,000/- respectively.
4. On 23-5-1981 the petitioners presented the instant writ petition before this Court and prayed for a writ of mandamus directing the opposite parties to give the letter of acceptance for collection of Sal Seeds for the South Kheri Forest Division to the petitioners they being the highest tenderers and further prayed that the opposite parties be required to execute the deed of agreement. On 23-5-1981 this Court passed an interim order directing the petition to come up for orders on 26-5-1981 and till that date the opposite parties were directed not to issue the letter of acceptance to any tenderer except one whose tender was highest. It may be noted that in spite of this order, the opposite parties on 30-5-1981 proceeded to reauction the lots in question and did not accept the petitioners' highest bid for no ostensible reason. The argument of the learned counsel for the petitioners is that in spite of the stay order passed by this Court, the opposite parties proceeded to reauction the lots in question. According to the petitioners, this action on the part of the opposite parties is arbitrary and is not informed by reasons. It is conceded by the petitioners that it was open to the opposite parties to have rejected the petitioners' highest bid but that could be done if there were justifiable reasons for not accepting the highest bid. It is further maintained that once the State Government had taken a decision that the auction for the year 1981 shall be held by inviting tenders and the contract shall be executed in favour of the highest bidder, the opposite parties without any justification could not depart from the practice and proceed to reauction the lots, The petitioners claim that since they are the highest bidders and since for no justifiable reason the lots have been reauctioned, the action of the State Government in re-auctioning the lots in dispute is liable to be quashed as being unjustifiable and discriminatory and that the opposite parties be required to execute the contract for three years in their favour.
5. After the writ petition was filed, it was noticed that out of 14 Divisions in respect of which contract for the collection of Sal Seeds were to be executed, 11 Forest Divisions had been awarded on the basis of the highest tenders. On 26th May, 1981, the learned Chief Standing Counsel made a statement at the Bar that in respect of the three Divisions, namely, South Kheri, East Bahraich and West Bahraich, the State Government had decided that it would not accept the highest tender of the petitioners. According to the petitioner, this was to give a fresh opportunity to Oudh Sugar Mills who after filing their writ petition also submitted their tenders with a protest. The tender of the Oudh Sugar Mills for South Kheri was for Rs. 13,11,000/- for East Bahraich Rupees 15,000/- and for West Bahraich Rs. 81,000/-. The highest tender of the Balajee Enterprises for Rs. 52,000/- was for East Bahraieh and for Rs. 1,08,000/- for West Bahraich. The highest tender of the petitioners for the South Kheri was for Rs. 17,73,000/-. According to the petitioners from the facts stated above, they have reason to believe that the reauction was decided upon with a view to benefit Oudh Sugar Mills and this discriminatory treatment in respect of the three Divisions by holding the reauction was only to serve the private interests of the Oudh Sugar Mills. In 1977 lease for South Kheri, West and East Bahraich for collection of Sal Seeds was granted to Oudh Sugar Mills for a sum of Rs. 7,42,000/- for fora years, which comes to Rs. 1,85,500/- per year. In the year 1981, the highest tender for South Kheri of the petitioners for Rupees 17,73,000/- for three years was the highest while the highest tender of Balajee Enterprises was Rs. 52,000/- for East Bahraich and Rs. 1,08,000/- for West Bahraich for three years. Thus the total of the three Divisions was Rs. 19,33,000/- for three years Rs. 6,44,300/- per year which is three and a half times of the old rates. It may be emphasized here again that in the 11 Forest Divisions the highest tenders were accepted but in these three Divisions, the highest tender was not accepted and this departure, according to the petitioners was made with a view to benefit the Oudh Sugar Mills. In these circumstances, the petitioners' case is that the action of the opposite parties in reauctioning the three Divisions, namely, South Kheri, East Bahraich and West Bahraich is discriminatory and is liable to be struck down. It is also prayed that a writ of mandamus be issued to the opposite parties to give the contract to the petitioners for three years in regard to South Kheri Range and in regard to Balajee Enterprises in respect of East and West Bahraich Ranges.
6. The petition was opposed by the opposite parties. A counter-affidavit has been filed on behalf of opposite parties Nos. 1 and 2. The counter-affidavit is sworn by one Shree Ram who is a Head Clerk in the Office of the Conservator of Forests Utilization Circle, U. P., Lucknow. It was admitted on behalf of opposite parties that the tender of the petitioner in respect of the Forest Division in question was the highest and since the offer was under consideration with the State Government, the letter of acceptance was not issued. In reply to para 9 of the writ petition it was denied that the petitioners were in any way pressurised to surrender North and South Gorakhpur and East and West Dehradun Regions. It was also denied that the petitioners were pressurised to surrender the offer for South Kheri Division by opposite party No. 2. It is maintained by the opposite parties that under condition No. 5 of the tender notice it was not obligatory for the Forest Department to accept the highest offer. According to the said condition, the Conservator of Forests Utilization Circle, U. P., Lucknow may accept or reject all or any of the tenders without assigning any reason. In view of condition No. 5 of the tender notice, it was not obligatory on the part of the opposite parties to accept the highest tender; hence any arrangements made by the petitioners without getting any acceptance letter were at their own risk and responsibility. It is further maintained that under condition No. 9 of the tender notice of offer of the tenders was to remain open for a period of 45 days and the matter was dealt with as expeditiously as possible. According to the opposite parties unless the offer had been accepted and an acceptance letter had been issued, there was no contractual obligation on the part of the State Government. In paras 21 and 22 of the counter-affidavit, the opposite parties have stated their case in clear terms. It is stated that one of the reasons for not accepting the highest offer in respect of the Divisions in dispute was that the price increases appeared to be low as compared to other Divisions. The Forests of South Kheri Division were good from the point of view of Sal Seed collection. This fact will be borne out by the comparative statement of prices received in this tender and those received in the expiring leases. Moreover, when the lease for one year was given after inviting tenders on 30-5-1981 the highest offer was Rs. 11,10,000/- compared to the highest offer for South Kheri Division ot Rs. 17,73,000/- for a period of three years or an average of Rs. 5,91,000/- per year. The case of the opposite parties is that the writ petition does not disclose any actionable cause of action for the exercise of extraordinary jurisdiction under Article 226 of the Constitution of India.
7. The facts brought out by the opposite parties to oppose the writ petition were replied by a rejoinder-affidavit. On behalf of the petitioners the rejoinder-affidavit is sworn by Mr. Y. K. Nathani. In para 4 of the rejoinder-affidavit it has been stated that the letter of acceptance with regard to the South Kheri Division was not issued on account of the fact that the Oudh Sugar Mills, which had earlier obtained the lease of the Division, was bent upon to get the same again by any means. Although Writ Petitions Nos. 1838 and 1897 of 1981 were dismissed on 15-5-1981 the letter of acceptance in regard of the Forest Divisions for which the petitioners were the highest tenderers was not given and on 22-5-1981 only one Division namely. South Pilibhit was given by the letter of acceptance and in respect of South Kheri letter of acceptance was not given as Oudh Sugar Mills was very much interested in its control. It has also been stated in the rejoinder-affidavit that there was no justification to withhold the issuance of letter of acceptance as there was no material before the State Govt. at that time to compare the offer with respect to South Kheri Division. The Chart attached to the rejoinder-affidavit, Annexure 9 would show that there was much increase in the offer in respect of South Kheri. In para 8 of the rejoinder-affidavit, it has been stated by the petitioners that after filing of the writ petition on 23-5-1981, the opposite parties instead of giving letter of acceptance, decided arbitrarily without giving any substantial notice for the reauction of the three Divisions i. e. South Kheri, East Bahraich and West Bahraich. A notice for reauction was served on the petitioners on 27th May, 1981 in the Court premises which has also been challenged in the writ petition. On 26-5-1981 the application for stay in the instant writ petition was listed for orders and the same was adjourned for 29-5-1981 for disposal. The Court passed stay order staying the holding of public auction on 30-5-1981 subject to the condition that the stay will be operative for the current season and the State will make arrangements for the current season. The petitioners after receipt of the stay order submitted a copy of the same to opposite party No. 2 who gave a notice to the petitioners by which fresh tenders were invited for these three Divisions on 30-5-1981. Tenders were to be submitted till 3 P. M. and were required to be opened the same day at 5.15 P. M. A copy of the said notice is attached as Annexure 10 to the counter-affidavit. According to the petitioners, decision to hold reauction in respect of these Divisions was taken in order to oust the petitioners from the field. The action of inviting tenders in suck unholy hurry by the State Government was challenged by the petitioners in another Writ Petition No. 2716 of 1981 in which on 30-5-1981 this Court passed the order that even, if the tenders were opened the amount of the same would not be disclosed to anyone and no further action for the same will be taken. In case the tenders had been opened no further action in the matter will be taken till 1-6-1981. The stay order was communicated to the Chief Conservator of Forests but in spite of that he issued the letter of acceptance to the Oudh Sugar Mills. According to the petitioners, the reason for non-issuance of the letter of acceptance to the petitioners in respect of South Kheri Division was that it should not go out of the hands of Oudh Sugar Mills. The petitioners in para 12 of the rejoinder-affidavit reiterated their case by saying that once the Government decided to invite the tenders in respect of the said Forest Divisions and the tenders were submitted, there was no justification to withhold the tenders and not to give letter of aceptance to the highest tenderers. Once the highest tender is opened, the highest tenderer is entitled to get a contract and it is only on some valid reason that the tenders can be cancelled. The condition contained in Clause 5 of the auction notice is violative of Article 14 of the Constitution and the Conservator of Forests has no absolute right to reject any tender without assigning any reason when the offer made is the highest. In para 18 of the rejoinder-affidavit the petitioners have stated that two opposite parties were not right in saying that the main reason for not accepting the highest offer in respect of the Forest Divisions in dispute was that the price increase appeared to be low in respect of South Kheri Division as compared to other Divisions. The Chart submitted with the counter affidavit as Annexure GA-1 was not correct so far as item No. 6 pertaining to South Kheri Division was concerned. According to the petitioners, a correct comparative statement of the Sal Seeds collection for three years was attached as Annexure 9 to the rejoinder-affidavit and a perusal of the same would indicate that 33.33% price increase shown under item No. 6 in Annexure CA-1 to the counter-affidavit is misleading and the correct figure would be 286.275.
8. After the rejoinder-affidavit by the petitioners was filed the opposite parties sought permission to file a supplementary counter-affidavit. In the supplementary counter-affidavit it is maintained by the opposite parties that Shri Y. K. Nathani is either a partner or is associated with all the three firms, namely, M/s. Balaji Enterprises, M/s. Durga Associates and Avadh Enterprises. Out of 16 Forest Divisions offered for tenders, the firms in which Shri Y. K. Nathani is a partner were successful in obtaining tenders in respect of as many as eight Forest Divisions totalling a sale of Rs. 55,18,000/- against five Forest Divisions, totalling a sale of only Rs. 6,30,500/- belonging to other firms. According to the opposite parties, there is no question of any bias against Shri Y. K. Nathani or any of the firms represented by him including Durga Associates. In para 14 of the supplementary counter-affidavit it has been stated that the price rise in respect of South Kheri was much too low as compared to North Gorakhpur and South Gorakhpur Regions. In the reauction, one of the participants was Shri Y. K. Nathani who is a partner in all the three firms, namely M/s. Avadh Enterprises, M/s. Balajee Enterprises and M/s. Durga Associates and as such his participation in the retender goes to show that sufficient opportunity was given to him to bid for the same along with others. It is also pointed out by the opposite parties that Shri Nathani while participating in the re-tender of the said area of the South Kheri Division offered a tender for Rs. 11,00,700/-for the same for one vear but as the same was not highest it was not accepted- In reply to the supplementary counter-affidavit, a supplementary rejoinder-affidavit was also filed.
9. In this petition we have heard Mr. Shanti Bhushan, Senior Advocate for the petitioners and the learned Advocate General on behalf of the State of U. P. It was submitted by the learned counsel for the petitioners that the petitioners' bid for the Division in question was the highest. The learned counsel conceded that although the State Government is not bound to accept the highest bid but if a departure is to be made then the same can be done only for valid reasons. It is also contended that condition No. 5 attached to the tender notice that the Conservator of Forests may accept or reject all or any of the tenders without assigning any reason is hit by Article 14 of the Constitution of India. In this respect the learned counsel for the petitioners has placed reliance on Ramana Dayaram Shetty v. International Airport Authority (AIR 1979 SC 1628). By reference to paras 20 and 21 of the said decision, it was contended that the State Government in its dealings with public cannot act arbitrarily and enter into relationship with any person it likes at its sweet will. Its action must be in conformity with some principle which meets the test of reasonableness. This rule flows directly from the doctrine of equality embodied in Article 14 of the Constitution. The said Article strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory, it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The learned counsel for the petitioners laid special emphasis on the following observations made by Bhagwati. J. in the said case ;--
'The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C. J. in Erusian Equipment and Chemicals Ltd. v. State of West Bengal (AIR 1975 SC 266) (supra) where the learned Chief Justice pointed out that the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the mailer of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the pur-case of the goods. It must, therefore, follow as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with anyone, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground.'
The case reported in Ramana Dayaram Shetty v. International Airport Authority (AIR 1979 SC 1628) (supra) was discussed at length in another decision of the Supreme Court, reported in Kasturi Lal Lakshmi Reddy v. State of Jainmu & Kashmir (AIR 1980 SC 1992). In this case also the judgment was rendered by Bhagwati, J. In paragraphs Nos. 10 to 16 of the decision it was again emphasized that discretionary action should be free from arbitrariness and any action taken by the State Government should be informed with reasons. While dealing with public, the State Government is required to act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground. The learned counsel for the petitioners relied upon the following passage from the decision reported in Kasturi Lal's case (supra):--
'Though ordinarily a private individual would be guided by economic considerations of self-gain in any action taken by him, it is always open to him under the law to act contrary to his self-interest or to oblige another in entering into a contract or dealing with his property. But the Government is not free to act as it likes in granting largess such as awarding a contract or self-ing or leasing out its property ........ Every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest: the Government cannot act arbitrarily and without reason and if it does, its action would be liable to he invalidated. 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 the validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid.'
The Hon'ble Judge of the Supreme Court while discussing the case of Maneka Gandhi v. Union of India (AIR 1978 SC 597) observed that the concept of reasonableness in fact pervades the entire constitutional scheme. In this respect Bhagwati, J. ob-served as follows (para 12):--
'The interaction of Arts. 14, 19 and 21 analysed by this Court in Maneka Gandhi v. Union of India (AIR 1978 SC 597) clearly demonstrates that the requirement of reasonableness runs like a golden thread through the entire fabric of fundamental rights and, as several decisions, of this Court show, this concept of reasonableness finds its positive manifestation and expression in the lofty ideal of social and economic justice which inspires and animates the Directive Principles. It has been laid down by this Court in E. P. Royappa v. State of Tamil Nadu (AIR 1974 SC 555) and Maneka Gandhi's case (supra) that Article 14 strikes at arbitrariness in State action and since the principle of reasonableness and rationality, which is legally as well as philosophically an essential element of equality or non-arbitrariness, is projected by this article, it must characterize every governmental action, whether it be under the authority of law or in exercise of executive power without making of law.'
10. In the aforesaid case, it has also been observed that if the Court is satisfied that the action taken by the executive is unreasonable or not in public interest, it would be the plainest duty of the Court under the Constitution to invalidate the governmental action. This is one of the most important functions of the Court and also one of the most essential things for preservation of the rule of law. Bhagwati, J. after referring to the decisions reported in E. P. Royappa v. State of Tamil Nadu (AIR 1974 SC 555) and Maneka Gandhi v. Union of India (AIR 1978 SC 597) (supra) affirmed the principle of reasonableness and non-arbitrariness in governmental action which, according to the learned Judge, lies at the core of our entire constitutional scheme and structure.
11. It is clear from record that in the year 1977 tenders were invited for collection of Sal Seeds for four years and the contracts were actually given to the highest bidders. The periods of these contracts expired in 1981. Hence a policy was to be laid down in respect of subsequent years with respect to collection of Sal Seeds. It is on record that the State Government decided that the work of collection of Sal Seeds should be given to (i) Terai Anusuchit Janjati Vikas Nigam Ltd., according to their demand, (ii) Modern Bakeries India Ltd. should also be given the lease to collect Sal Seeds if they were ready to do so on tender basis, (iii) in the remaining regions the work of collection of Sal Seeds be given to Forest Corporation if they were ready to do so without any special increase in staff and (iv) in the remaining areas the work of collection of Sal Seeds be given on lease for three years for which tenders be invited. This decision was the subject matter of inquiry in Writ Petition No. 1897 of 1981 (reported in 1982 All LJ 572). A Division Bench of this Court in regard to the said policy observed as follows (at p. 581):--
'The Government thus did take into consideration the demands made by the petitioners for extension of the period of the lease, the offers made by Modern Bakeries and the resolution of the Central Government and the demand made by public Corporation vide Annexure A1 to the supplementary counter-affidavit filed on behalf of State Government. There has been great escalation in the prices of Sal Seeds and prices have almost risen about 3 1/2 times of the price prevailing in 1977. The decision to invite fresh tenders for a period of three years is, in the circumstances, neither arbitrary, nor unreasonable but is in public interest. It is neither hit by Article 14 of the Constitution nor by the principles of natural justice.'
By reference to the above observations made in Annexure 3 to the petition, it was contended on behalf of the petitioners that a policy decision had been taken that for the collection of Sal Seeds tenders be invited and lease be given for three years. Once it is held that this decision is in public interest, the opposite parties had to invite tenders for the collection of Sal Seeds in pursuance of the scheme referred to above. It has also come in evidence that for other Divisions the highest tender has been accepted. In the instant case, the opposite parties without assigning any reason for not accepting the highest tender submitted by the petitioner rejected the same. The action of the opposite parties, according to the petitioners is arbitrary as the action is not informed by reasons. In spite, of a direction by this Court, the opposite parties have not placed before us the file of the case to ascertain whether there are reasons on the file. In this background it is submitted that either there are no reasons for not accepting highest bid or if there are reasons they are unsupportable and cannot stand the test of reasonableness. The learned Advocate General has strenuously contended that in view of condition No. 5 of tender notice and in view of what has been stated in the counter-affidavit filed by the State, the petitioners are not entitled to any relief.
12. The first question that awaits the consideration of this Court is whether the highest bid of the petitioners in respect of the Division in question has been unreasonably rejected or not. In this connection, it would be relevant to quote a passage from 'De Smith's Judicial Review of Administrative Action', Fourth Edition. At page 148, the learned authority observed as follows :--
'There is no general rule of English law that reasons must be given for administrative (or indeed judicial) decisions. If, however, reasons are given voluntarily and these disclose that an erroneous legal approach has been followed, the superior Courts can set the decision aside (e. g. by certiorari to quash for error of law on the face of the record) or award mandamus to hear and determine the matter according to law. If moreover, no reasons for an administrative decision are preferred at all it does not follow that the Courts are powerless to intervene. For if a person seeking to impugn such a decision establishes a prima facie case of misuse of power by the administrative authority, failure by that authority to offer any answer to the allegations may justify an inference that its reasons were bad in law or that it had exercised its powers for a legally inadmissible purpose. In the absence of reasons, however, it will often be difficult to establish a prima facie case that a wide discretionary power has been improperly exercised.
In certain other situations there may be an implied duty to state the reasons or grounds for a decision. A person prejudicially affected by a decision must be adequately notified of the case he has to meet in order to exercise any right he may have to make further representations or effectively to exercise right of appeal.'
Applying the aforesaid principles of reason-ableness, it appears that opposite parties had already taken a decision that for the years 1981 onwards, the lease for the collections of Sal Seeds shall be given by public auction. It is not disputed that the bid of the petitioners was highest. It is conceded by the petitioners that the State is not bound to accept the highest bid. But if the bid of the petitioners which happened to be highest is not accepted, the opposite parties cannot arbitrarily and without any reason cancel the auction and make a reauction of the Divisions in dispute. In such circumstances, it was incumbent upon the State Government to have apprised the petitioners of the reasons for making such a departure. The Supreme Court in Ramana Dayaram Shetty v. International Airport Authority (AIR 1979 SC 1628) (supra) and Kasturi Lal Lakshmi Reddy etc. v. State of J. & K. (AIR 1980 SC 1992) (supra) has clearly emphasized that if the action of the State Government is arbitrary then Article 14 of the Constitution is attracted as it strikes at the arbitrariness in State action and ensures fairness and equality in treatment as observed by Bhagwati, J. in Ramana Dayaram Shetty v. International Airport Authority (supra), the requirement is that the State action must not be arbitrary but 'must be based on some rational and relevant principle which is non-discriminatory, it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality'.
In our opinion, once the decision was taken that the lease for collection of Sal Seeds shall be given by public auction and the bid of the petitioners was the highest, it was expected of the opposite parties before reauctioning the Divisions to have informed the petitioners of reasons why the highest tender of the petitioners was not accepted. This requirement in the instant case is all the more necessary as in respect of other lots the opposite parties have accepted the highest bid. During the course of arguments in the writ petition, the opposite parties attempted to justify their action by reference to facts stated in the counter-affidavit. We shall deal with those reasons at a later stage but the initial mistake on the part of the opposite parties is that before taking decision to reduction the lots the petitioners should have been apprised as to why the highest bid of the petitioners was not acceptable. It has been conceded by the petitioners that the opposite parties are free to accept or not to accept the highest bid. But while rejecting the highest bid they have to state reasons for departing from the normal practice The Supreme Court in the decision referred to above have clearly laid down that the State cannot act arbitrarily in entering into relationship directly with third parties but its action must conform to some standard or norm which is rational and non-discriminatory. The State has the right to trade and is under an obligation to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. It follows that though the State is entitled to accept or reject the highest bid, it cannot act arbitrarily and choose any person it likes for entering into contractual relationship. In such circumstances the State action must be in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground.
13. During the course of the arguments on the application of the petitioner we called upon the learned Advocate General to produce the file of the case as we wanted to see for ourselves whether there are any reasons contained in the file. The file has not been produced before us nor is there anything on record to indicate why the decision to reduction the Forest Division in dispute was taken when the petitioners' bid was highest and other lots had been leased out to other persons by reason of the fact that their bids were highest The inference deducible from the non-production of the file of the case is that either there are no reasons for reauctioning the Forest Divisions or if there are reasons, the said reasons are indefensible.
14. The learned Advocate General attempted to justify the order for holding re-auction by reference to facts stated in paragraph 22 of the counter-affidavit and para 14 of the supplementary counter-affidavit. In para 22 of the counter-affidavit it is stated that one of the main reasons for not accepting the highest bid of the petitioners was that the price increases appeared to be low as compared to other Forest Divisions. According to opposite parties, the forests of South Kheri Division were good from the point of view of Sal Seeds collection and this fact is borne out by the comparative statement of the price increase indicated in Annexure No. C-A 1. A perusal of Annexure C-A1 will indicate that in respect of South Kheri Range the percentage of price increase is indicated as 33.33%. This calculation is demonstrably wrong as is clear from the facts contained in para 18 of the rejoinder-affidavit. The correct figure would be 286.275. In the chart attached to the rejoinder-affidavit the percentage increase is indicated as 286.275. The mistake in the chart Annexure C-A1 to the counter-affidavit is obvious and the opposite parties have nothing to say to the percentage increase given as 286,275 in Annexure 9 to the rejoinder-affidavit. In para 14 of the supplementary counter-affidavit it has been stated that in regard to West Dehrudun Forest Division although the area is about 37.197 hectares, the total production from this division was only of the order of 1,905 M. Tonnes, whereas for South Kheri area whereof was also about 36,000 hectares the production was as high as 9,068 M. Tonnes. The production from Gorakhpur North and South Regions was 8.686 M. Tonnes. According to the opposite parties, in view of the facts stated in para 14 of the counter-affidavit it was felt that the price rise in respect of South Kheri was much too low as compared to Gorakhpur, North and South Ranges. In para 11 of the supplementary rejoinder-affidavit, it has been stated that if the basis of re-tender or re-auction of the South Kheri, East and West Bahraich, was low price rise than North and South Pilibhit Divisions, Haldwani, Kalagarh, and North South Gonda Divisions should also have been reauctioned. According to the petitioners this has not been done.
15. Since the records of the case have not been produced before us, it is difficult for us to hold that the State Government decided to reauction the divisions in question for the reasons set out in paras 22 of the counter-affidavit and 14 of the supplementary counter-affidavit.
16. In view of the fact that no justifiable basis has been pointed out to us to reduction the lots in question, the action taken by the opposite parties in reauctiomug the same is arbitrary and unreasonable regard being had to the principles enunciated by the Supreme Court in Ramana Dayaram Shelly v. International Airport Authority (AIR 1979 SC 1628) and Kasturi Lal Lakshmi Reddy v. State of J. & K (AIR 1980 SG (992) (supra). If the initial act of re-auctioning was unconstitutional to the sense that it did not stand the test of reasonableness, it was arbitrary and was not supported by reasons.
17. It was further contended that the petitioners M/s. Balajee Enterprises and Avadh Enterprises are sister concerns, and Mr. Y. K. Nathani is intimately associated with all the three firms. In the reauction, Balajee Enterprises and Avadh Enterprises participated in the auction. It has also been pointed out to us that out of 14 Divisions a number of Divisions have been taken on lease by the three concerns. In view of the fact that Mr. Y. K. Nathani has participated in the reauction, it is contended by the opposite parties that the three concerns knew about the correct facts and since most of the Forest Divisions have gone to the three concerns, this Court may not exercise its powers under Article 226 of the Constitution in favour of the petitioners. We find no merits in this submission in view of the fact that the initial action taken by the opposite parties in reauctioning the lots was arbitrary and illegal.
18. It was next contended that apart from being arbitrary, the action of the opposite parties in ordering a reauction of the aforesaid Forest Division was wholly mala fide. In this connection it was contended that the attitude of the opposite parties has to be taken into consideration. On 23-5-1981 Writ Petition No. 2524 of 1981 was presented in which it was prayed that a writ or direction in the nature of mandamus be issued to the opposite parties to give a letter of acceptance for collection of Sai seeds to the petitioners for South Kheri Forest Division. After filing of the writ petition, the opposite parties accepted the highest tender of M/s. Balajee Enterprises in respect of North and South Gorakhpur Divisions, Out of 14 Divisions, contracts for 11 Forests Divisions have been awarded on the basis of highest tenders. On 23-5-1981, this Court passed an order that the writ petition shall come up for admission on 26-5-1981. Till 26-5-1981 the opposite par-ties were directed not to issue letter of acceptance regarding South Kheri Forest Division and other Divisions in the matter of collection of Sal seeds to any tenderer except those whose tender was the highest.
On 29-5-1981 this Court passed the following order on the stay application.
'Under these circumstances, the public auction to be held tomorrow is stayed but subject to the following conditions :--
(1) The stay will be operative only for the current season.
(2) The State will make arrangement for the current season in accordance with law.'
In view of the said order, the auction which was proposed to be held on 30-5-1981 for granting a three years' lease was not held and since this Court had permitted the State to make arrangement for the ''current season' in accordance with law, it invited tenders for one year lease in respect of the East and West Bahraich and South Kheri Forest Divisions. The tenders were to be submitted and opened the same day. It is contended by the petitioners that they filed Writ Petition No. 2716 of 1981 along with an application for interim relief on that date (30-5-1981) after giving due notice to the Chief Standing Counsel. The petition was filed at the residence of Hon. U. C. Srivastava, J. and at 6.20 P. M. on 30-5-1981 an interim order was passed to the effect that even if the tenders were opened, the amount of the same would not be disclosed to anyone and no further action on the same will be taken, and that in case the same had been opened, no further action in the matter will be taken till 1-6-1981. The writ petition and the Stay Application were directed to come up on 1-6-1981 before Hon'ble S. C. Mathur, J. The petitioners contend that in spite of the knowledge of this writ petition and the application for the interim relief and the further knowledge that the matter was being argued at the residence of Hon'ble U. C. Srivastava, J. the opposite parties did not wait for the orders of this Court and proceeded to grant one year lease in respect of the aforesaid Forest Divisions on the basis of the tenders opened on that date. The opposite parties, on the contrary, contended that there was nothing very unusual about this conduct. They invited our attention to the contents of para 14 of the counter-affidavit dated Oct. 20, 1981 filed in Writ Petition No. 2716 of 1981. It has been stated by the opposite parties in para 14 of the aforesaid counter-affidavit as under :--
'That the inference derived and the allegations contained in para 11 of the writ petition are not correct. It is stated that auction notice was issued for the auction of Sal seed lease for 3 years of East and West Bahraich Forest Division and South Kheri Forest Division, but in compliance with the High Court order, the auction fixed for 30-5-1981. was cancelled. Since the Court had also made arrangement for the current season in accordance with law, so the intending bidders, who had collected, on 30-5-1981, in response of the auction notice and newspaper advertisement for the auction of Sal lease for 3 years for these three divisions were informed that the auction will not take place in view of the Court order, but instead, tenders are being invited for year lease. These tenders have now been opened, work order issued and concerned lessee has now more or less finished the work in the forests. It is also incorrect to allege that the tenders were taken out in haste, as the time for Sal seed collection, which is only about a month duration has already started and any further delay would have caused substantial loss of revenue hence advantage of publicity done for the sale by auction was taken, instead of doing separate publicity and giving long period of tender notice. It is also mentioned that Sri Y. K. Nathani, as one of the partners of M/s. Avadh Enterprises submitted tenders for South Kheri. East Bahraich and West Bahraich Divisions. The highest tenders of this firm for East Bahraich and West Bahraich were accepted and they have started the work in terms of conditions of the tender notice of 30-5-1981. It is denied that notice was short or deliberately kept short or there were no bidders.'
19. The learned counsel for the petitioners fairly stated that he would not contend that one year lease in respect of South Kheri Forest Division was granted in contravention of the interim order passed by this Court on 30-5-1981. He, however, contended that the opposite parties were trying to hastily grant lease in respect of the South Kheri Forest Division to a person other than the petitioners whose tender had already been found to be highest on 21-4-1981. In this connection the learned counsel for the petitioners drew our attention to the contents of para 12 of the writ petition in which it has been asserted by the petitioners that when they contacted the Forest Secretary on phone on 22-5-1981, the latter told the petitioners that no useful purpose will be served for making efforts for other Divisions as the Government has already taken the decision to give letter of acceptance to other tenderers and will issue the same on the next day, that is 23-5-1981. It has also been asserted by the petitioners in the rejoinder-affidavit dated 14-12-1981 that the motive behind the non-issuance of the letter of acceptance to the petitioners in respect of South Kheri Forest Division was that it should not go out of the clutches of the Oudh Sugar Mills which had already lost in this Court and withdrew its Special Leave Petition in the Supreme Court. On the basis of these pleadings and the conduct of the opposite parties referred to above it is contended by the learned counsel for the petitioners that the action of the State Government in not issuing the letter of acceptance to the petitioners was wholly mala fide. It has already been mentioned above that M/s. Oudh Sugar Mills had already filed Writ Petition No. 1897 of 1981 which was dismissed by this Court on 15-5-1981. A similar Writ Petition No. 1838 of 1981 M/s. Hind Company v. State of U. P. was also dismissed by this Court by the same judgment on 15-5-1981 (reported in 1982 All LJ 572). M/s. Oudh Sugar Mills filed Special Leave Petition in the Supreme Court which was later withdrawn by them. It is not understandable that the State Government which had refused to extend the term of the lease in favour of M/s. Oudh Sugar Mills would soon after the decision of the -writ petition in which M/s. Oudh Sugar Mills had lost, decide to favour M/s. Oudh Sugar Mills. Even the averments made by the petitioners in this regard which are contained in paragraph 12 of the writ petition are not sufficient to warrant the conclusion that the Government was trying to help M/s. Oudh Sugar Mills unnecessarily. It will be noticed that M/s. Oudh Sugar Mills has not been referred to in paragraph 12 of the writ petition. The insistence of the learned counsel for the petitioners that the averments made in paragraph 12 of the writ petition should be believed as they have not been controverted by a counter-affidavit filed by the Forest Secretary is also not acceptable inasmuch as the averments by themselves lead us nowhere particularly when the name of M/s. Oudh Sugar Mills has not been mentioned in the said paragraph of the writ petition.
20. The question that now arises is as to what relief can be granted to the petitioners.
21. It may be noted that the auction of the South Kheri Forest Division and East and West Bahraich Forest Divisions was for three years, namely 1981-82, 1982-83 and 1983-84. Since the period for collection of Sal seeds is between April to June, the lease granted in the re-auction expired in the month of June. The order for reauction was challenged in respect of the year 1981-82 by the petitioners in Writ Petition No. 2716 of 1981. During the course of arguments it was conceded by the learned counsel for the petitioners that since the lease period in respect of the year 1981-82 had expired, Durga Associates were not entitled to any relief in respect of that year and that writ petition No. 2716 of 1981 was liable to be dismissed as having become infructuous. But in regard to other years, namely 1982-83 and 1983-84 it is submitted that the petitioners' case may be considered as the action of the opposite parties in proposing to reauction the said Divisions was illegal.
22. The learned counsel for the petitioners contended that the highest bid of the petitioners is Rs. 17,73,000/- and the highest bid in the tenders opened on 30-5-1981 comes to Rs. 11,10,000/- for one year. He prays that for the remaining two years, the lease may be granted to the petitioners on payment of Rs. 6,63,000/-. The learned counsel for the petitioners also stated that if this arrangement is not acceptable to the State Government, it may grant lease to the petitioners in respect of the Forest Division in question for the years 1982-83, 1983-84 and 1984-85 for Rs. 17,73,000/-.
23. It has already come on the record that tenders for the collection of Sal seeds for a period of three years 1981 to 1983 seasons were invited and the results of the highest bids in respect of the different Divisions have been given in para 5 of the supplementary counter-affidavit dated 24-12-1981. The result may be quoted below:--
Sl. No. Forest Division
Highest bid in rupees
Name of party offering highest bids
M/s. Balaji Enterprises
M/s. Avadh Enterprises
M/s. Brijbasi Enterprises
M/s. Kaloo Khan
M/s. Balajee Enterprises
M/s. Oudh Sugar Mills, Hargaon
- do -
M/s. Sethia Oil Industries, Sitapur.
M/s. Durga Associates
- do -
M/s. Bulaji Enterprises
North Gonda (except Rampur and Bhabhar Range)
M/s. Balaji Enterprises
24. In para 14 of the same supplementary counter-affidavit the opposite parties have given the relevant area and the productionstatistics in respect of the various Forest Divisions. They are given below:--
Total production (77-80) in M. Tonnes
No collection made
19,419 Area has got reduced
25. A comparative study of the aforesaid figures would reveal that the total area of North Gorakhpur and South Gorakhpur Forest Divisions is 38,636 yielding 8,686 Metric Tonnes of Sal seeds for a total value of Rs. 11,70,000 plus Rs. 15,66,000 = Rupees 27,36,800. The area of South Kheri Forest Division a 35,965, i.e. less than the total area of North and South Gorakhpur Divi-sios. The South Kheri Forest Division, however showed a yield of 9,068 metric tonnes of Sal seeds daring 1977-80 and the peti-tioners had offered a bid of Rs. 17,73,000/-for the next three seasons. When tenders were invited and ultimately opened on 30-5-1981 in respect of South Kheri Forest Divisions for purpose of granting only a year's lease, it was found that a sum of Rupees 11,00,000/- was stored in respect of this Division for one year alone. This was the offer of M/s. Oudh Sugar Mills. Even Mr. Naithani who is the representative of the petitioners and who is also a partner in M/s. Avadh Enterprises had offered a sum of Rs. 11,00,700/- for this Division.
26. This Court while exersising its extraordinary jurisdiction under Article 226 of the Constitution cannot ignore the aforesaid facts and will have to take into consideration the relevant matter that on a re-tender in respect of South Kheri Forest Division, there was a tremendous difference in the price offered for one year as compared to a sum of Rs. 17,73,000/- offered for three years for the same Division by the petitioners. The petitioners have tried to justify this difference by stating in para 18 of their rejoinder-affidavit dated 14-12-1981 that 'the growth of Sal seeds in the forests, is very slow and uncertain and particularly with a view that if there is a growth in one year than next year almost there is no growth, then again next year there are chances of good growth, taking this factor into consideration the tenders were given for three years. As the year 1981 was the year of good production of Sal seeds there was every likelihood of good gsrowth of Sal seeds in the year 1981. Taking this into consideration the petitioner made his offer for Rs. 17 lacs and 73 thousand for South Kheri Division .....'
27. This statement of She petitioners can-not be accepted for the simple reason that there is no basis that if the growth of Sal seeds is good in one year, it would not be good in the next year. Moreover, there is nothing on the record to show that the offer of Rs. 17,73,000/- was made by the petitioners in respect of South Kheri Forest Division for a period of three years after taking into consideration the nature and the stage of the crop which would have indicated to him in the month of April 1981 that it would be a bumper crop in the year 1981. The fact, however, remains that on a re-lender on 30-5-1981 a sum of Rs. 11,10,000/-was offered for one year alone in respect of this Forest Division. As stated earlier, even the representative of the petitioners offered a sum of RS. 11,00,700/- in his capacity as partner of M/s. Avadh Enterprises, in this situa-tion it would not be proper and possible for this Court to direct that the lease in respect of this Forest Division be granted to the petitioners for the remaining two years for a sum of Rs. 6,63,000/- or for the next three years, that is, 1982-83, 1983-84 and 1984-85 for Rs. 17,73,00/-.
28. For the reasons staled above, Writ Petition No, 2716 at 1981 is dismissed as having become infractuous. Writ Petition No. 2524 of 1981 is decided in the mannerindicated below:--
(a) In regard to South Kheri Forest Range, the opposite parties will re-auction the lots in question for the years 1982-83 and 1983-44 in the manner permissible by law.
(b) In the circumstances, we direct that the parties shall bear their own costs.
29. After the judgment was pronounced, learned counsel for the petitioner prayed that this Court may certify that the ease is fit for appeal to the Supreme Court. We have decided the controversy between the parties on the basis of the principles enunciated by the Supreme Court in the eases referred to in the body of judgment. The question involved in this writ petition was the applicability of those principles. We based our decision on the principles enunciated by the Supreme Court In this view of the matter, we think that this case is not fit for appeal to the Supreme Court The prayer for leave to appeal to the Supreme Court is refused.