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Asiatic Labour Corporation Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Contract
CourtGujarat High Court
Decided On
Case NumberSpl. Civil Appln. Nos. 171, 1786, 2161, 2162, 2394 and 3572 of 1981
Judge
Reported inAIR1983Guj86
ActsConstitution of India - Articles 14, 19(1), 19(6) and 226; Code of Civil Procedure (CPC), 1908 - Sections 9 and 21; Orissa (Control of Trade) Act, 1961 - Sections 3, 4 and 10; Indian Railway Code - Rules 323, 324, 331, 332 and 1111
AppellantAsiatic Labour Corporation
RespondentUnion of India (Uoi) and ors.
Appellant Advocate Ram Jethmalani,; V.P. Shah,; P.B. Majmudar,;
Respondent Advocate S.C. Gupta,; Mangaldas M. Shah,; G.N. Desai,;
DispositionPetitions dismissed
Cases ReferredTrilochan Mishra v. State of Orissa
Excerpt:
contract - tenders - articles 14, 19 and 226 of constitution of india and sections 9 and 21 of code of civil procedure, 1908 - petition challenging act of extending contract without inviting open tenders - evidence on record to prove that administration behaved in reasonable and valid manner in interest of public - extension given on previous terms and conditions - public exchequer not suffered by continuance of contract - petition filed on basis of certain letters written to railway minister - affidavit not filed by petitioner in that regard - allegation in letter cannot carry case of petitioner - petition failed. - - the chief commercial superintendent recommended to the general manager as under, vide his note dated 17th sept. (iv) the adjustment of rates both on schedule rates as.....ordera.m. ahmadi, j.1. this group of writ petitions which are brought under article 226 of the constitution relate to certain goods handling contracts given by the western railway administration in respect of the sabarmati bg-mg group 63, bharat-pur bg-mg group 37 and the hapa transhipment point. the petitioners of these petitions claim to have experience and expertise in carrying out goods handling work for the railway administration. their grievance is that as the contracts in respect of the aforesaid three transhipment points were given or extended without inviting open tenders, they were prevented from competing which they were entitled to as citizens of india and. therefore, the railway administration had acted in violation of their constitutional rights. they, therefore, pray that.....
Judgment:
ORDER

A.M. Ahmadi, J.

1. This group of writ petitions which are brought under Article 226 of the Constitution relate to certain goods handling contracts given by the western Railway Administration in respect of the Sabarmati BG-MG Group 63, Bharat-pur BG-MG Group 37 and the Hapa Transhipment point. The petitioners of these petitions claim to have experience and expertise in carrying out goods handling work for the Railway Administration. Their grievance is that as the contracts in respect of the aforesaid three transhipment points were given or extended without inviting open tenders, they were prevented from competing which they were entitled to as citizens of India and. therefore, the Railway Administration had acted in violation of their constitutional rights. They, therefore, pray that the contracts executed in respect of the aforesaid transhipment points should be quashed and the railway administration should be directed to grant fresh contracts in accordance with the normal open tender system.

2. The contract in respect of the Sabarmati transhipment point is given to M/s. Universal Goods Handling Company. The contract in respect of the Bharatpur Transhipment point is executed in favour of M/s. Chirag & Company. Though the contracts for these two points are separate, composite petitions Nos. 171, 2161, 2162 and 3572 all of 1981 have been filed bv different petitioners, albeit on identical grounds, challenging the grant of contracts to the aforesaid two parties. Similarly two petitions Nos. .1786 and 2394 of 1981 have been filed challenging the grant of Hapa Transhipment contract to M/s. Lotus Handling Company. The facts leading to these petitions, briefly stated, are as under:--

Re : Sabarmati BG-MG Group 63 Contract.

In the year 1975 the Western Railway invited tenders for goods handling contract in respect of the Sabarmati Transhipment point. Tenders were received from several contractors but the contract was ultimately given to Messrs Universal Goods Handling Company. The said contract was for a period of three years but after the said period expired, the Western Railway, instead of inviting fresh tenders, extended the period of the contract by another three years i. e. up to 15th Mar 1981, plus 121 per cent above the fixed schedule of rates. Before the extended period of the contract expired, the contractor wrote a letter dated 6th Sept. 1980 to the Chief Commercial Superintendent, Western Railway. Bombay, stating that because of the constant rise in prices and the increase in expenditure for recruitment and maintenance of labour, it was not possible for him to complete the contract at the existing rates. The contractor, therefore. requested that either the rates should be increased reasonably or the letter should be treated as three months' notice under Clause I (i) of paragraph 2 of the contract. On receipt of this letter the Railway Administration was required to decide whether to negotiate with the contractor for the increase in rates or to treat the contract as terminated on the expiry of the notice period. The Chief Commercial Superintendent recommended to the General Manager as under, vide his Note dated 17th Sept. 1980, Annexure II to his affidavit in-reply in Special Civil Application No. 171 of 1981 --

'6. It is the normal policy to invite fresh tenders a few months before the expiry of the contract, and when under special circumstances, it is necessary to extend the contract this is done on the existing rates and terms. The existing contract as already mentioned is due to expire on 15-3-1981. The case for negotiation does not have a precedent and is to be considered in the light of the factors explained in the then CCS's note at NPS 33 to 38.

7. In the circumstances and as the performance of the present Contractors -- Messrs Universal Goods Handling Company, Ahmedabad, has been satisfactory and the railway connot afford to risk entrusting the handling work at this major transhipment point to inexperienced contractors, who may not have the resources and capability to match the fluctuations in the traffic we may in the interest of the Administration, if GM approves, hold negotiations with the Contractor for a reasonable settlement of the rates. If the proposal holding negotiations with the Contractors is approved by GM, it would be necessary to nominate a Negotiation Committee for the purpose.'

The General Manager agreed with this recommendation and appointed a Negotiation Committee consisting of three high ranking officers. The Negotiation Committee held discussions with the contractors on as many as four occasions and submitted its report, (Annexure III to the affidavit-in-reply in Special Civil Application No. 171 of 1981) recommending as under:--

'11.5. The Committee agreed that Sabarmati being the most vulnerable transhipment point on this railway, the transhipment arrangements would have to be on a very sound basis as any upset in its working would have far-reaching repercussions on the operations and earnings of this railway. It is, therefore, necessary to select a very experienced and resourceful contractor so as to ensure that the handling work does not suffer on any account but would go on smoothly all the time. The economy in the rates alone cannot, therefore, form the guiding factor in deciding the award of contracts of this type.

12. In the circumstances, the Committee feel that the offer of Messrs Universal Goods Handling Co. Ahmedabad at +390% above the Schedule of Rates which is +121.72% as compared to the rates accepted at +121% above the schedule of rates in the year 1975 and + 84.16% above as compared to the escalated rate of +155.07% above the Schedule of Rates applicable for the period from 6-7-1980 to 15-8-1980, is reasonable. The annual value of the contract estimated is Rs. 45,00,348-41 paise. The Committee, therefore, recommend that the fresh contract be awarded to Messrs Universal Goods Handling Co. Ahmedabad at this rate on a single tender basis with the following conditions existing in their current contract:--

(i) Additional rate of +40% allowed in the existing contract for direct transhipment of coal contained in one BOX wagon into 3 MG covered wagons both at transhipment platforms and at dump site as existing in the current contract should be continued.

(ii) Similarly, for lifting of coal from the dump site and loading into 3 MG covered wagons, an extra rate of +60% as allowed in the existing contract should be continued.

(iii) For transhipment of general goods falling under items d(l), d(3) and d(4) in the ratio of 4 MG wagons into 3 BG wagons, the Contractors should be paid +50% extra as existing in the current contract.

(iv) The adjustment of rates both on Schedule Rates as well as percentage rate accepted would be done on monthly basis based on Consumer Price Index figures maintained for Ahmedabad centre but actual payment/adjustment will be made every quarter treating the Consumer Price figures of October 1980 as the base.'

This decision was submitted to the Railway Board for its approval. The Board accorded approval by its letter dt. 18th Dec. 1980. Accordingly, a new contract for three years with the revised rates became effective from 1st January 1981.

3. The petitioners contend that if the Railway Administration had followed the normal open tender system, they as well as others were prepared to offer far lower rates than those allowed to the present contractor, which would have resulted in a substantial savins to the public exchequer. According to the petitioners the officers of the Railway Administration were for some oblique reason out to favour the contractor of their choice and the entire exercise of appointing a Negotiation Committee and seeking the prior sanction of the Board was nothing but window dressing. That is why, contend the petitioners, the timely warning given by Shri Amar-singh Rathwa, Member of Parliament, to the Railway Minister fell on deaf ears. They, therefore, contend that by refusing to invite offers at per the normal practice the Railway Administration deprived the petitioners of their legal and constitutional right to enter into a fair competition to secure the contract in question. They, therefore, prav that the mala fide action of the Railway Administration reserves to be set at nought so that their favoured contractor does not unjustly enrich himself at the cost of the public excheouer.

The Bharatpur BG-MG Route Wo. 37 contract.

4. In the year 1977 Messrs Chirag & Company was given a goods handling contract for three years by the Railway Administration by resorting to the open tender system. However, after the expiry of about two years, the coal dump work was completely stopped with the result that the contractor was not required to carry out his said obligation under the contract and yet as the contract was not terminated a lumpsum payment had to be made under the terms of the contract resulting in loss to the public exchequer. Not only that but at the end of the contract period the Railway Administration without inviting fresh tenders renewed the contract for a further period of three years on the same terms and conditions and at the same rates which was not in public interest. The petitioners contend that the grievance made by other contractors at the highest level fell on deaf ears and the contract period was extended in an arbitrary manner with a view to favouring the existing contractor. The petitioners, therefore, contend that the Railway Administration had by resorting to this manoeuvre of invoking the extension cause in the contract deprived the petitioners and others similarly situated of an opportunity of competing which they would have got if open tenders were invited as Per the normal practice. The petitioners, therefore, challenge the extension of the period of the contract in favour of the existing contractor on the ground that it is in violation of their legal and constitutional right to compete for the contract by offering favourable terms to the Railway Administration

5. In the affidavit-in-reply filed on behalf of the Railway Administration a preliminary contention regarding jurisdiction is raised on the ground that no part of the cause of action in respect of the Bharatpur contract has arisen within the State of Gujarat. The concerned contractor too has raised a similar objection. The contract was given to Messrs Chirag & Company for three years from 1st Feb. 1978 after following the open tender system as their quotations were the lowest. The performance of the said contractor was satisfactory and, therefore, it was considered advisable in public interest not to disturb the arrangement since the contractor was agreeable to continue the work at the same rates. It was thought that if tenders were invited having regard to the rise in labour charges, etc., there was every likelihood of higher rates being quoted. With the shifting of coal transhipment to Agra East Bank from Jan. 1980, Bharatpur became a transhipment point for crane consignments only. Since the performance of the contractor was satisfactory, the General Manager accepted the recommendation of the Negotiation Committee after examining the rising trend in the rates offered in the recent past for similar contracts and on being satisfied that if fresh tenders were invited, the Railway Administration would have to pay higher rates which was not in public interest. It was in these circumstances that the Railway Administration resorted to the single tender system and renewed the contract in question. It is, therefore, denied that the contract was extened for a further period of three years i. e., up to 31st Jan. 1981 with a view to favouring the contractor. On similar lines is the affidavit-in-reply of the contractor.

Re : Hapa Transhipment point.

6. Viramgam was the second biggest transhipment point on Western Railway as all the broad-gauge lines ended there. The whole of the Saurashtra region was connected to Viramgam by meter gauge lines. Consignments of goods from Saurashtra region required to be transhipped at Viramgam. The Hapa Transhipment point came into existence in June 1980 when the broad gauge lines were extended up to Hapa under the Viramgam-Okha-Porbandar Project. The transhipment point, therefore, temporarily shifted to Hapa pending completion of the project. The petitioners contend that the Railway Administration by resorting to the limited tender system awarded a contract for one year i. e. from 15th June 1980 to 15th June 1981 to Messrs Lotus Handling Company. Under the limited tender system, only a few experienced contractors are invited to submit their quotations. According to the petitioners only those contractors who were their favourites were invited to submit quotations and ultimately the contract was given to the aforesaid firm which is the sister concern of Messrs Chhotalal Jamnadas & Company, a monopolist in this line. Since the contract period was to expire on 15th June 1981 and since no fresh tenders were invited the petitioners apprehended that the contract may be renewed without calling for fresh tenders and hence they filed the present proceedings with a view to compelling the Railway Administration to resort to the normal open tender system before granting or renewing the contract for the subsequent period.

7. The Railway Administration in its affidavit-in-reply states that when the question of granting the contract for the transition period at Hapa was considered by a Committee of Senior Officers it was felt that only experienced contractors who had successfully handled similar work at major transhipment points should be invited to offer quotations for the work. Accordingly seven contractors were invited and ultimately the contract went to the aforesaid firm. The petitioners were not invited as their records were not satisfactory. As regards the allegation that the railway was encouraging monopoly it is averred that no firm by the name of Messrs Chhotalal Jamnadas & Company has been in existence since the last 15 years. It is lastly contended that the petitions have become infructuous because the contract has been extended for a furtber period of one year under an express extension term in the existing contract. In other words the contract executed for the initial period of one year itself made provision for extending the contract period and it was in pursuance of the said term that the period came to be extended for another year. The allegation that the contract has been awarded to one of their favourites is denied. More or less on the same lines is the affidavit-in-reply filed by a partner of the contractor-firm. It is not necessary to traverse the averments at this stage but I will make specific reference to them as and when required in the course of this judgment.

8. It is obvious from the above averments that the gravamen of the charge against the Railway Administration is that it acted in a highly arbitrary and discriminatory manner in the matter of awarding handling contracts in respect of the aforesaid transhipment points by departing from the well recognised and normal method (the open tender methodl for awarding contracts to help their favourites. Counsel for the petitioners contends that in a welfare State where the State activity extends to awarding of contracts payment, wherefor come out of the public exchequer, the Government is bound to act consistently with Article 14 of the Constitution and it cannot arbitrarily or in accordance with its whim or caprice grant the contract to any one it chooses shutting out other competitors who are otherwise eligible. The reason suggested by the railway that Sabarmati and Hapa were highly sensitive points where it could not afford to default is of no significance because, 'argues the learned counsel, it does not have the effect of wiping out arbitrary discrimination abhorred by Article 14 of the Constitution. Mr. Jeth-malani went so far as to contend that it was an absolute rule of administrative law that the State cannot award a contract except by inviting public tenders and any departure from this rule can only be on pain of the action being set at naught. On the other hand the learned counsel for the Railway Administration as well as the contesting contractors submitted that when the State desires to award a contract it should normally do so by inviting public tenders. They however contended that in exceptional cases a contract can be awarded without resorting to the open tender system provided it strictly conforms to the twin test of Article 14, viz., it is not arbitrary and is within the ambit of the rules, if any, and it is in public interest so to do. According to them in the present case both these tests are satisfied and therefore the decision of the Railway Administration deserves to be upheld. It was lastly pointed out that the allegations of corrupt motive have been based on unwarranted inference arising out of unfounded suspicion.

9. In a welfare State where a Govt, or any undertaking of the Government operates in the commercial field it is required to give contracts for carrying out some of its obligations as it may not have the expertise to undertake such jobs departmentally. These contracts are more or less paying propositions. The percentage of profit being generally high, there is always a rush for securing such contracts. It may be a State largess but all the same it is not a booty which the State can shower at its sweet-win regardless of individual rights. The Government is not in the position of a private party who is dealing with his own funds and is free to throw the same away. In a welfare State the Government deals with public money and is, therefore, accountable for the same. While dealing with public money its conduct must necessarily be conditioned by the consideration that it must not act in an arbitrary manner. Where a Government or any undertaking of the Government enters into a contract its behaviour must be different from that of a private party which is free to pick and choose in the matter of grant of contracts. In other words, even in matters of giving contracts, the action of the Government must conform to the broad requirements of Article 14 of the Constitution. Mathew J. in V. Punnen Thomas v. State of Kerala, AIR 1969 Ker 81 (FB) observed that 'the Government is not and should not be as free as an individual in selecting the recip-ients for largess. Whatever its activity the Government is still the Government and will be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal.' Bhagwati J. while speaking for the Division Bench in the case of Ramana Dayaram Shetty v. International Airport Authority of India, AIR 197S SC 1628 after pointing out that in a welfare State more and more of our wealth is spent in welfare activities which are undertaken through private agencies posed a question whether they can be regarded as gratuity furnished by the state so that the State may withhold, grant or revoke it at its pleasure Is the position of the Government in this respect the same as that of a private giver, asked the learned Judge. He then proceeds to answer the poser by saying 'we do not think so'. The. learned Judge then observes as under:

'The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largess in its arbitrary discretion or at its sweet will. xxxxx The Government cannot be permitted to say that it will xxxxx enter into contracts xxxxx only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith.' The learned Judge, therefore, held that law required that where the Government was dealing with the public, whether bv way of giving jobs or entering into contracts or granting other forms of largess, the Govt. could not act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standard or norm which is not arbitrary, irrational or irrelevant. The learned Judge then proceeded to sum up the discussion in the following words : 'The power or discretion of the Government in the matter of grant of largess including award of lobs, contracts, quotas, licences, etc., must be confined to and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.'

In a subsequent decision in the case of M/s. Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir, AIR 1980 SC 1992, the same learned judge while speaking for the Division Bench, after referring to the decision in the international Airport Authority's case observed that the discretion of the Government in the matter of giving largess is not unlimited, but is conditioned by two limitations imposed by law which Structure and control discretion of the Government in this behalf. The first is in regard to the terms on which the largess may be granted and the second in regard to the persons who may be recipients of such largess. proceeding further it is observed that '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 interest and if it fails to satisfy either test, it would be unconstitutional and invalid.' In other words, if the governmental action fails to satisfy the twin test mentioned above, it would be liable to be struck down as invalid. Consequently, if the Government or an undertaking of the Government acts in a manner so as to benefit a private party at the cost of public exchequer, such an action would be against public interest and would, therefore, be liable to be struck down. The learned Judge, however, cautioned (at p. 20011 :

'But one basic principle which must guide the Court in arriving at its determination on this question is that there is always a presumption that the governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the Court by proper and adequate material.' Reference may also be made to a recent decision of the Division Bench of this Court in the case of Prabhudasbhai Bhi-khabhai Patel v. state of Gujarat, (1981) 22 Gui LB 570 : (AIR 1981 Gui 117). That was a case in which the State Government refused to award a contract to the tune of about RS. 37 crores to the lowest bidder. The said party filed a petition under Article 226 of the Constitution complaining of violation of Article 14 of the Constitution. The contract was granted to respondent No. 6 Company which had (1) vast experience in executing large contracts not only in India, but in Iraq, (2) vast organisation, and (3) vast resources as compared to the lowest bidder. The petition was summarily rejected by the learned single Judge and against the said decision a Letters patent appeal was filed. The Division Bench consisting of M. P. Thakkar and R. C. Mankad JJ. posed two questions namely, (1) What matters in the life of a Nation saving of a couple of crores of rupees or (i) satisfactory (ii) successful, and (iii) timely, execution of a work of National importance and significance (2) Does the Court exercise appellate jurisdiction against an administrative decision of the executive to grant a contract and take upon itself the responsibility to make contracts itself? In other words, will the Court run the administration for the executive How far can the Court probe when there is no charge of mala fides or oblique motive The affidavit filed on behalf of the contesting parties indicated that the party was prepared to execute the work for about Rs. 6 crores less. The decision of the Executive was challenged on the sole ground that it was arbitrary. It was submitted on behalf of the appellant that the appellant-Society had in the past executed numerous works satisfactorily and hence the - contract ought to have been awarded to it particularly because it would have resulted in a saving of Rs. 6 crores to the State Exchequer. Dealing with this argument, the Division Bench observed as under (at p. 118 of AIR) : 'The jurisdiction of this court in a matter of this nature is understandably circumscribed. This Court will not sit in appeal against the administrative decision to award, or not to award, a contract and substitute its own decision for the decision taken by the State Government. The decision to award contract to respondent No. 6 company can be quashed and set aside provided and only provided it is established that the decision is arbitrary and discriminatory so as to attract Article 14 of the Constitution of India. We are not prepared to say that merely because the lowest bid is not accepted, the decision is rendered arbitrary, We are also not prepared to sav that a saving of about Rs. 6 crores is a consideration which should have weighed with the State Government. In fact it would appear that completion of the work in an efficient and satisfactory manner at the earliest and within the stipulated time limit is of much greater importance having regard to the nature of the work and its impact on the National economy not to speak of the economy of the State.'

10. Examining the matter in the above perspective, the Court pointed out that respondent No. 6 Company had executed numerous large projects satisfactorily even at the International level, against global competition and had vast experience and could be trusted to execute the work in question in the best possible manner and in the shortest span of time. In this view, the Division Bench repelled the charge that the State had acted in an arbitrary manner so as to attract Article 14 of the Constitution.

11. Strong reliance was placed by Mr. Jethmalani on certain observations of the Supreme Court in the decision rendered in Rasbihari Panda v. State of Orissa, AIR 1969 SC 1081. Before I deal with this case I think it would be advantageous to refer to the decision of the Supreme Court in Akadasi Padhan v. State of Orissa, AIR 1963 SC 1047 wherein the validity of the Orissa (Control of Trade) Act 1961 was challenged as violative of Article 19(1) (f) & (g) of the Constitution. The petitioner Akadasi padhan was the owner of 130 acres of land in village Bettagada, Subdivision Rairakhol in the District of Sambalpur and in about go acres of the said land he grew Kendu leaves. Kendu leaves were used for the manufacture of Bidis. Prior to 1961 the petitioner carried on extensive trade in the sale of Kendu leaves by transporting them to various places in and outside the District of Sambalpur, Bui since the Act was passed in 1961 and was brought in to force with effect from 3rd Jan. 1962 the State acquired a monopoly in the trade of Kendu leave and that put severe restrictions on the fundamental rights of the petitioner under Article 19(1) (f) and (g) of the Constitution. The allegation was that the Act creates a monopoly in favour of certain individuals described as Agents by the relevant provisions of the Act, and in that sense it was a colourable piece of legislation. Three notifications were issued under the provisions of the Act, validity whereof was also under challenge. The first notification published under Section 5 of the Act gave a schedule of the Districts, the number of units in which the districts were divided and the local areas covered by the said units. The District of Sambalpur whereof the petitioner was the resident was divided into 5 units and the petitioner's lands fell within Units 2 & 5. Thereafter applications were invited from persons who desired to be appointed as Agents of the Government for purchase of and trade in Kendu leaves and the notification by which these applications were called for made it clear that the Government reserved to itself the right to reject any or all applications in respect of any unit without assigning any reason whatsoever. By a subsequent notification the price for the Kendu leaves was prescribed at 50 leaves per naya paise. This price, it was said, was fixed in consultation with the Advisory Committee appointed under Section 4 of the Act. The last notification was in the nature of a corrigendum by which certain corrections in the unit notified earlier were made. In the challenge so far as the validity of the Act is concerned, a question of importance regarding the scope and effect of Article 19(6) of the Constitution also arose. The Court after referring to the amendment made under Article 19(6) observed that the State may, according to the exigencies of the case and consistently with the requirements of any trade, business, industry or service, exclude the citizens either wholly or partially. In other words, the concept of State monopoly was accepted. The Court further observed that when a State carries on any trade, business or industry, it must inevitably carry it on either departmen-tally or through its officers appointed in that behalf unless it is inexpedient to do so in which case it may employ agents, private agents to work pn behalf of the State and not for themselves. The Court, however, found on a consideration of the terms and conditions of the agreement actually entered into between the Government and the Agents that the agent was allowed to carry on the trade substantially in his own account subject, of course, to the payment of the amount specified in the contract. If he made any profit after complying with the said terms, the profit could be carried away by him. Similarly, if there was loss he had to bear the loss. He was, therefore, not accountable to the State and the State Government was not responsible for his actions. The Court, therefore, found it impossible to hold that the agreement in question was consistent with the terms of Section 3 of the Act. The Court, therefore, held that the agreement was invalid. After this decision was rendered by the Supreme Court, the State Government in exercise of the powers conferred by Section 10 of the Act decided to Have offers for advance purchase of Kendu leaves only from the persons who purchased these leaves from individual unit during the preceding year and who acted as purchasers without default and to the satisfaction of the Government and the method of sale by open competition was given up. The petitioner's offer for payment of higher price was spurned. Rasbihari panda, therefore, moved a petition under Article 226 of the Constitution challenging the action of the Government. Several other petitions were also filed challenging the legality of the new method adopted by the State Government. It was urged on behalf of the petitioners that in seeking to enter into an agreement for advance purchase contract for Kendu leaves by private negotiations the State Government sought to support their party interest in preference to public benefit as envisaged by the State monopoly. The action was, therefore, challenged as a colourable device. Section 10 of the Act authorised the State to sell or otherwise dispose of Kendu leaves purchased by the Government in such manner as the Government may direct. At first, a scheme was evolved under which the Government proposed to renew the licences of those traders who had worked satisfactorily in the previous year and had paid the amounts due from them regularly. That scheme was challenged by Ragbihari and the Government thinking that it may be struck down withdrew it. It then decided to invite tenders for advance purchase of Kendu leaves but restricted the invitation to only those individuals who had carried out the contracts satisfactorily and without default in the preceding year. This method of sale was also challenged as violative of Articles 14 and 19 (1) (g) of the Constitution. It was negatived by the High Court and hence the petitioner Rasbihari approached the Supreme Court (AIR 1969 SC 1081). It is on this decision that Mr. Jethmalani placed considerable reliance. The Supreme Court pointed out that the original scheme was itself open to grave doubt since it sought to exclude many persons interested in the trade. Bv the new scheme, the Government restricted the invitation to those traders who had executed their contracts in the previous year satisfactorily and without default. Even this revised scheme was found to be objectionable since only a limited number of traders was permitted to purchase Kendu leaves whereby other traders were effectively kept out. The scheme was, therefore found to be discriminatory and one imposing unreasonable restrictions upon the right of the traders other than those who were invited to purchase and to carry on their trade or business. It was unsuccessfully argued on behalf of the Government that since the existing contractors had carried out their obligations in the preceding year regularly and to the satisfaction of the Government, they formed a class by themselves, and the said classification bore a just and reasonable relation to the object sought to be achieved by the statute namely, the effective execution of the State monopoly in the larger public interest. Their Lordships of the Supreme Court held that 'the scheme of selling Kendu leaves to selected purchasers or of accepting tenders only from a specified class of purchasers was not 'integrally and essentially' connected with the creation of the monopoly and was not, on the view taken by this Court in Akadasi padhan's case. protected by Article 19(6)(ii): it had therefore to satisfy the requirement of reasonableness under the first part of Article 19(6).' It must, however, be pointed out that no attempt was made to support the scheme on the ground that it imposed reasonable restrictions on the fundamental rights of the traders to carry on business in Kendu leaves. On behalf of the State no explanation was offered as to why a well-known manufacturer's offer to purchase the entire crop for Rs. 3 crores was turned down. Their Lordships pointed out that if the interest of the State were alone to be taken into consideration, the State stood to gain by a Crore of Rupees by accepting that offer. It is necessary to bear in mind two facta which were highlighted by Mr. Gupta, the learned Counsel for the Railway Administration, so far as the observations made by the Supreme Court in this decision are concerned, namely. (1) failure on the part of the Government to support the scheme on the ground that it imposed reasonable restrictions and (2) failure on the part of the Government to explain why it did not ac-cepf the offer by which it stood to gain a substantial amount of one Crore Rupees. After the aforesaid scheme was declared invalid by the Supreme Court some of the provisions of the very same Act and the Rules made thereunder were challenged before the Supreme Court in Trilochan Mishra v. State of Orissa, AIR 1971 SC 733. The Supreme Court after referring to the challenge in the earlier two decisions held that the revised policy regarding the appointment of agents was not arbitrary or discriminatory. The grievance of one of the petitioners was that although his tender was the highest the contract was settled in favour of another party who had quoted a lower rate. The allegation of the said petitioner was that his tender was rejected because he had failed to pav contribution to party fund. Dealing with this submission their Lordships of the Supreme Court made the following observations in para 15 of the judgment, on which reliance was placed by the learned Counsel for the Railway Administration :

'Government certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. Moreover, Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tendered.'

This was the principle which was in the mind of the Division Bench of this Court when it summarily rejected the Letters Patent Appeal in prabhudas-bhai's case (19811 22 Guj LR 570 : (AIR 1981 Guj 117).

12. The position in law that emerges may now be summarised as under:

The Government or an undertaking of the Government is not bound to give a contract or largess in any other form and is free to have the work executed departmentally. However, if the Government decides to award a contract or any other largess its action would be liable to be tested on the touchstone of reasonableness and public interest. If the Governmental action does not satisfy either test its action is liable to be struck down as unconstitutional and invalid. The discretion of the Government in this behalf is not unlimited, that is to say, it cannot give or withhold largess in an arbitrary fashion, or at its sweet will, but must be confined and structured by rational, relevant and non-discriminatory standard or norm so as to conform to the requirement of Article 14 of the Constitution. If it departs from the aforestated standard, it can do so on peril of its action being struck down, unless it is shown that the departure is not unreasonable and arbitrary, but is based on some valid, rational, reasonable and non-discriminatory principle. If the Government invites tenders ordinarily the tenderer who offers the most reasonable terms, so far as the Governmental interest is concerned, should be preferred but this is not an absolute rule of public or administrative law. as was urged by Mr. Jeth-malani because it is open to the Government to accept the tender of a tenderer offering less favourable terms. If such tenderer is preferable, on an over all consideration such as, experience in executing such work, availability of organisational set up, financial resources, etc. at its disposal, the Government certainly has the right to enter into the contract with a tenderer well known to it, especially one who has in the past faithfully executed the contract awarded to it in preference to an undesirable or unsuitable or untried party. In other words, the Government is not bound to take the risk of awarding a contract to an untried party where the nature of the work to be done requires special skill, expertise and foresight. Even if the said party has quoted the most favourable terms, the Government, while awarding the contract is bound to take into consideration the capability of the tenderer to properly execute the work within the time schedule keeping in view the possibility of the untried tenderer abandoning the work fa notoriously well known phenomenon) and the resultant loss or damage that may be occasioned because of the delay that may be caused in the ultimate execution and completion of the work in question. The legal position having been stated, we now move on to the other aspects of the case.

13. The Western Railway Finance Manual, 1958 lays down that the work of handling and transhipment of goods, parcels, luggage is done through any one of the following agencies:

(1) Departmental labour.

(2) Station Master, and

(3) Contractors.

Where it is underetaken depaptmental-ly, Class IV staff has to be engaged at a few stations for doing the handling work. The handling work is entrusted to the Station Masters at small stations and to the handling contractors at larger stations. It lays down that for the purpose of determining whether the work should be entrusted to a Station Master, the Railway Board has prescribed an upper limit of 75,000 maunds per month up to which Station Masters may normally be entrusted with Handling Contracts. Where the work exceeds the said limit and is to be entrusted to a Contractor, the general practice followed for selecting contractors is to call for open tenders. The instructions for dealing with tenders are contained in Chapter V of the Manual. The preamble to Chapter V states that the Indian Railways spend Crores of Rupees on the purchase of raw-material and the execution of works. It is, therefore, necessary that all purchases should be economically made to obtain the best value possible for the money spent and, to keep down the rates, tender system in one form or the other is adopted by the Railway Administration. It then sets out the different methods of inviting tenders as under :

(i) By invitation to one firm only ('single' tender or 'private' purchase).

(ii) By direct invitation to a limited number of firms ('limited tender') and

(iii) By advertisement ('Open tender').

The State Railway Code for the Stores Department also refers to tre aforesaid three tender methods. Rule 323 lays down that the exceptions made to the general rule that tenders should be called for in all cases, are based only on practical considerations in order to avoid delay and unnecessary work in cases of comparatively small value. Rule 324 refers to the open tender system and states that this system of invitation to tender bv public advertisement in the most open and public manner possible, should be used as a general rule and must be adopted, subject to the exceptions noted in paragraphs 331 and 332 in all cases in which the estimated value of the tenders to be received is Rs. 5,000/-or over, R. 331 refers to powers of 'Agents', (this expression is used because these rules were enacted when the Railways were managed by Companies under the British Rule) in Exceptional Cases. Rule 332 next provides ad tinder :

'332. The Agent may also decide not to call for tenders of any category in cases where sufficient reasons exist to indicate that it is not in the public interest to call for tenders. In all cases (except those of works contracts based on schedule rates in force on the railway, the individual value of each of which is estimated not to exceed Rs. 50,000), where the Agent decides not to call for tenders, the reasons shall be recorded and communicated by the Agent to his Financial Adviser.'

In place of 'Agent' we must now read 'General Manager' as these powers are now vested in the General Manager. The Indian Railway Code for the Engi-neering Department also refers to tenders in Rule 1111. It says that except where for reasons, which should be in the public interest, the General Manager decides that it is not practicable or advantageous to call for tenders, all contracts for over Rs. 5,000/- in value should be placed after tenders have been called for in the most open and public manner possible and with adequate notice. In the case of works contracts, based on schedule of rates in force on the railway, the individual value of each of which is estimated not to exceed Rs. 50,000/-, the General Manager may. at his discretion, decide not to call for tenders or to call for limited tenders from approved contractors without recording the reasons for doing so; in all other cases where the General Manager decides not to call for tenders, or to call for limited tenders, the reasons should be recorded and communicated to his Financial Adviser and Chief Accounts Officer. The Indian Railway General Code (Volume II --Appendices) refers to the powers of the General Managers of Indian Railways in Appendix VII. By the said Appendix the rules prescribing the cases in which General Manager and Managers of Indian Railways may not sanction expenditure or deal with other matters without the previous sanction of the higher authority have been set out. Entry 48 of that Appendix shows that the General Manager can enter into contracts in respect of the sanctioned works which do not exceed rupees 50,00,000/- for each contract. The Railway Board has by its communication dated 16th July. 1974 extended the powers of the General Managers and so far as entry 48 is concerned, the limitation of Rs. 50,00,000/- has been raised to Rs. 1 Crore for each contract, This means that the General Manager can sanction a contract worth one Crore of Rupees without being required to refer the same to the Railway Board. The rule position having been stated we now proceed to deal with the facts of each case.

14. So far as the Contract in respect of Sabarmati transhipment point is concerned, as stated earlier, it was granted [to Messrs. Universal Goods Handling Company, Ahmedabad in 1975 by resorting to the open tender method at + 121 per cent above the fixed schedule of rates. This contract was extended for a further period of three years from 16-3-1978 to 15-3-1981 at the existing rate of + 121 per cent above the fixed schedule of rate with an escalation clause added thereto. However, before the contract period expired, the Contractors wrote a letter dt. 6th Sept. 1980 stating that due to constant rise in prices and expenditure in the recruitment of labour, tremendous expenditure of labour maintenance due to fluctuation of traffic, the present contract rates were uneconomical. They, therefore, requested the Railway Administration to revise and reasonably increase the rates by resorting to negotiations. In the alternative, they stated that their letter may be treated as threa months' notice for the termination of the contract. On receipt of this notice the Law Officer was consulted and he opined that unless the Railway administration was prepared to negotiate with the contractors the letter has to bo treated as an advance notice of termination as per Clause (1) (1) of the Contract The Chief Commercial Superintendent, therefore, put up a note pointing out that Sabarmati was a major transhipment point and the Railway could ill-afford to default at such a sensitive point. He stated that the handling work at the said transhipment point was handled for almost a decade by Messrs. Continental Commercial Company but because of disagreement between the partners of that Company a serious situation leading to the termination of their contract had arisen sometime in Sept. 1974, Shri Virendra Sarabhai, a partner of Messrs. Universal Goods . Handling Company, Ahmedabad came forward to undertake the contract work for the remaining period from 16th Sept. 1974 to 15th March, 1975. Thereafter, open tenders were invited and as stated above, the present contractors were given the contract which they had executed satisfactorily. The Chief Commercial Superintendent was, therefore, of the opinion that notwithstanding the normal policy to invite fresh tenders a few months before the expiry of the contract, in view of the special circumstances pointed out in his note, he thought that it was advisable to resort to negotiations because the Railway could not take the risk of entrusting the work at a major transhipment point to inexperienced contractors who may not have the resources and capability to match the fluctuation in the traffic at the said point. The General Manager approved the recommendations of the Chief Commercial Superintendent and observed that Sabarmati being a major transhipment point on the Western Railway, the Railway Administration could not afford to default. He, therefore, constituted a Negotiation Committee comprising three senior Executive Officers of the Western Railway. The report of the Negotiation Committee shows that they were in favour of extending the contract without inviting open tenders because so far as the Sabarmati transhipment point was concerned, apart from being sensitive, the Railway was passing through a transitional period as its project to extend the Broad-Gauge Line on Viramgam-Okha-Porbandar Section had caused fluctuation in the quantum of traffic at Sabar-mati transhipment point since the Vir-amgam transhipment point had been shifted to Hapa. It appears from the recommendations made by the Negotiation Committee that they took into account not only the fluctuation in the quantum of traffic at Sabarmati transhipment point on the shifting of Vir-amgam transhipment point to Hapa but also change in the nautre of handling work to be undertaken at Sabarmati during the said transitional period. It was pointed out to the Negotiation Committee that before the aforesaid conversion, the general goods traffic and bagging consignments like grains, pulses, sugar, etc. were handled at the Sabarmati transhipment point, but after the commissioning of the Hapa transhipment point, the said goods traffic has totally discontinued at Sabarmati and instead the contractors at Sabarmati are required to handle the residual traffic such as Gypsum, Bauxite, Lime-stone, China clay etc. for which they have to maintain specialised labour for each commodity resulting in financial strains. They have pointed out that in the past the contractors at the Sabarmati transhipment point were required to handle on a average 110 coal wagons per day but with the commissioning of Hapa, the coal traffic was reduced to an average of 35 to 40 coal wagons and had at the same time become erratic. Coal moves in rakes and some 75 units are placed for transhipment every day. Sufficient labour force had, therefore, to be maintained to handle 75 wagons for otherwise, the contractors would be burdened with demurrage. Since the coal traffic is now erratic, rake, placements are received after a lapse of 4 to 5 days and at times 10 days with the result that labour remains idle and has yet to be paid by the contractors. Prior to the commissioning of Hapa approximately 25 wagons of loose were received per day on an average. After the commissioning of Hapa there is a manifold increase in the traffic. The loose traffic includes Gypsum. Bauxite. Limestone, China clay. etc. Since these commodities come in open stock they have to be transhipped in the same manner. For doing so, the labour has to enter and climb over the loaded stock, shovel it into the 'tagaras' and carry head loads into the BG empty wagons placed on the opposite side. Now loose lime is a hazardous commodity because it generates heat when it comes in contact with a wet substance. In the process of transhipment, the labourers perspire and when human perspiration comes in contact with lime, it generates heat and causes skin burns on the body of the labourers employed by the contractors. Medical aid has to he provided to such injured labourers and they also have to be given rest days. More or less the same situation obtains when Soda Ash is required to be transhipped from M. G. wagon to B. G. empties. Injuries are also caused to the labourers while transhipping other commodities like timber, iron sheets etc. The net result of all this is that the same gang of labourers cannot physically remain in position to undertake day-to-day manual work and have to be provided rest with full wages which results in considerable financial strain to the Contractors at the Sabarmati transhipment point. All these difficulties pointed out by the Contractors before the Negotiation Committee were taken into consideration and ultimately after three meetings the Negotiation Committee agreed to recommend a rate of + 390 per cent above fixed schedule of rates with an escalation clause. It was pointed out by the Negotiation Committee that with the all round increase in the rates of handling contracts if open tenders were invited in 1978 itself the rates of the Sabarmati contract would have far exceeded + 121 per cent above the schedule of rates notwithstanding the escalation clause allowed to all contractors, at selected transhipment points, including Sabarmati under the Railway Board policy. The negotiation committee then pointed out in para 11.2, that fresh contracts awarded by the Railway Administration by resorting to the open tender system during the last one year has shown a general trend for a sharp increase in the quotations received from the tenderers. It pointed out that for Agra East Bank group of stations the contract was awarded from 1st Dec. 1979 at + 390 per cent above schedule of rate resulting in an increase of + 96 per cent above the existing contract rates. At Ratlam Coal transhipment point, the administration had allowed an increase of 100% over the Ujjain rates from 21-2-1980. So far as Sawai Madhopur Transhipment point is concerned, it stated that the just finalised contract was permitted an increase oi + 128.91% over the existing rates. The Negotiation Committee pointed out that the rate of + 390% above the schedule of rates over the existing rates so far as Sabarmati contract is concerned showed an increase of + 84.16% over the existing rate which compared quite favourably with the rates allowed for the above mentioned contracts executed after following the open tender system. The Committee bearing in mind the fact that Sabarmati was the mogt vulnerable transhipment point on the Western Railway where transhipment arrangements have to be on very sound basis as even a minor upset causes for reaching repercussions on the operations and the earnings of the Railway recommended that the contract be renewed for a further period of three years on the revised rates suggested by it in the interest of smooth and efficient working at the said point. It also pointed out in para 13 of its report that as the contract value for a period of 3 years worked out to Rs. l,35,01,045.23p the acceptance of the recommendation was beyond the competence of the General Manager and required the Board's approval. The matter was accordingly referred to the Board which accorded approval by its letter dt. 18th Dec. 1980. On the basis of the approval received from the Railway Board the contract was extended for a further period of 3 years.

15. It will be seen from the above facts which clearly emerge from the note of the Chief Commercial Superintedent and the minutes of the Negotiation Committee that Sabarmati was considered to be one of the most sensitive transhipment points on the Western Railway, The contract at the said transhipment point was being handled by Messrs Continental Commercial Company for almost a decade before Sept. 1974. Because of some dispute between the partners of that firm a situation had arisen whereby it had become necessary for the Railway Administration to terminate their contract. At this point of time Shri Virendra Sarabhai came forward to undertake the responsibility for the remaining period i. e. from 16th Sept. 1974 to 15th March 75. Before this period expired the Railway Administration invited tenders by resorting to the open tender system. In pursuance to the tenders received, Messrs. Universal Goods Handling Company. Ahmedabad was awarded a contract for three years at + 121 Per cent above the schedule of rates. After this period was over, the contract was continued at the same rate with an escalation clause permitted as per the general policy of the Railway Board. Before expiry of the renewed term, the contractors indicated by their fetter of 6th Sept. 1980 that it was not economical for them to continue the contract in view of the change in the traffic pattern after the commissioning of the Hapa transhipment point. It, therefore, offered two alternatives to the Railway Administration namely, (1) Either to revise the rates by negotiation, or (2) to treat the letter as three months' notice as per Clause (1) (I) of para 2 of the Contract. The Railway was passing through a transition period as the Viramgam transhipment had been shifted to Hapa on the conversion of M. G. line into B. G. line in the Viramgam-Okha-Porbandar section. It was also noticed that the conversion was likely to be delayed beyond March, 1982 with the result that the contractor at the Sabarmati transhipment point will have to tolerate fluctuations and change in the pattern of traffic during the transition period. Having regard to the difficulties pointed by the contractor, a note whereof was taken in para 7 (1) of the minutes of the Negotiation committee, the Committee thought that an upward revision of the rates was unavoidable. It was also of the opinion that having regard to the fact that the Railway Administration was passing through a transition period, it was risky to invite new contractor to handle the work at such a sensitive point. Before recommending an increase of + 390 per cent above the schedule of rates, the Committee took into consideration the rise in the trend of quotations received at other transhipment points where open tender system was resorted to keeping in mind the proximity of time and the nature of work to be handled at the said stations. The Committee also took into consideration the satisfactory execution of the work at Sabarmati by the existing contractors as was obvious from the letters of appreciation produced at Annexures B-1 to B-5 in Special Civil Application No. 171 of 1981. Could it then be said that the Railway Administration had acted in an unreasonable manner in extending the contract period so far as the Sabarmati transhipment point is concerned? Was it not the1 duty of the Railway Administration to foresee the difficulties that would arise If a new contractor was placed in position having regard to the fact that it was passing through a transition period? Could it run the risk of awarding a contract to a new contractor particularly when the pattern of traffic at the Sabarmati transhipment point had undergone a change after the commission-ing of the Hapa transhipment point? In my opinion, having regard to the fad that Sabarmati was one of the most sensitive and vulnerable transhipment points on tfie Western Railway, and having regard to the fact that the Western Railway was passing through a transition period, and the change in the pattern of traffic and the other difficulties pointed out by the contractor had aggravated the difficulties of the Railway Administration, it would have been a rash act on the part of the Railway Administration to risk a fresh contractor on the specious plea that the normal method of awarding contracts was by resorting to open tender system. In my view it was in public interest to see that the movement of traffic at the aforesaid sensitive transhipment point was not disrupted, because a slight upset was likely to result in far-reaching repercussions in the operation and the earnings of the Railway Administration. I am, therefore, of the opinion that on the facts and in the circumstances of the case, it must be held that the Railway Administration has satisfied the twin test of its action being reasonable and in public interest.

16. We now proceed to the Bharatpur Contract, in so far as the petition concerning Bharatpur contract is concerned, two technical objections -- the first regarding jurisdiction and the second regarding misjoinder -- have been raised by the learned Counsel for the Railway Administration as well as the concerned Contractor Messrs Chirag & Company. I will first deal with tKese two technical objections and then proceed to the facts of the case.

17. Article 226 of the Constitution empowers every High Court throughout the territory in relation to which it exercises itg jurisdiction to . issue to any person or authority including the Government directions, orders or writs for the enforcement of any of the rights conferred by Part III of the Constitution or for any other purpose. It further provides that the said power may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action wholly or in part arises for the exercise of such power, notwithstanding that the seat of such Government or authority or residence of such person is not within those territories. So far as the Bharatpur contract is concerned, admittedly it is in respect of an area which is outside the State of Gujarat. The contract was awarded by the Chief Commercial Superintendent. western Railway, having his office at Bombay. The contract has to be executed at Bharatpur which is within the State of Rajasthan. It was, therefore, submitted by the learned Counsel for the Railway Administration and the concerned Contractor that no part of the cause of action had arisen within the jurisdiction of this court i. e. within the State of Gujarat and, therefore, this court had no jurisdiction to entertain the petitions in so far as they relate to the Bharat-pur contract. Mr. jethmalani submitted that the concerned petitioners had their offices in the State of Gujarat and since they could have submitted their tenders from their respective offices with the required earnest money had the Railway Administration resorted to the open tender system at least a part of the cause of action had undoubtedly arisen within the State of Gujarat and hence this Court had jurisdiction to entertain, hear and dispose of the petitions in so far as they relate to Bharatpur contract also. I am afraid, the submission made by Mr. jethmalani is far fetched. As has been pointed out earlier, the Railway Administration is entitled to resort to one of the three methods for awarding contracts. It is true that ordinarily it should resort to the open tender system, but as pointed out earlier, there is no absolute rule of public law or administrative law which precludes awarding of a contract by any other method. That is fairly well established from the decision in Kasturilal's case (supra) where the State of Jammu & Kashmir without resorting to the open tender system negotiated with a single party desirous of extracting resin for its factory set up within the said State. The decision of the State Government was considered to be reasonable and in public interest. In the case of the Bharatpur contract also, it was therefore open to the Railway Administration to resort to any one of the methods set out in the Rule referred to earlier for the purpose of awarding a contract Merely because the petitioners have their offices within the State of Gujarat wherefrom they could have submitted tenders if the Railway Administration had resorted to the open tender system, it cannot be validly contended that part of the cause of action has arisen within the State of Gujarat. In the present case the contract was entered into at Bombay, its execution i. e. performance was to take place at Bharatpur, all payments in respect of the said contract were to be made either at Bombay or Bharat-pur, that is to say, no part of the cause of action arose within the jurisdiction of this Court and hence this Court has no jurisdiction to entertain and dispose of the petitions in so far as they relate to the Bharatpur contract.

18. The petitioners have clubbed the challenge regarding Sabarmati and Bharatpur contracts in a single petition, instead of filing separate petitions. It is therefore contended by the Railway Administration as well as the concerned Contractor that the petitions suffer from the technical defect of mis-joinder. It is true that the contract in respect of Sabarmati transhipment point has nothing to do with the contract in respect of Bharatpur transhipment point. The rights of the petitioners in respect of these two contracts are separate and the reliefs claimed touch separate contractors in whose favour the contracts have been awarded. There can. therefore, be no doubt that separate petitions ought to have been filed in respect of the Sabarmati contract and the Bharatpur contract. A single petition in respect of both the contracts is, strictly speaking, not maintainable. However, I do not propose to put the petitioners to option because I have come to the conclusion that this Court has no jurisdiction in so far as the Bharatpur contract is concerned,

19. Messrs Chirag & Company were awarded contract for three years i. e. from 1-2-1978 to 31st Jan. 1981 after inviting open tenders. The previous contractors Messrs Western Goods and Transport Corporation were given a contract for three years i. e. from 1-2-1975 to 31-1-1978 at a rate which was higher by 17.73 per cent than the rates quoted by Messrs Chirag & company in 1978. When the period of the contract was about to expire the contractor requested the Railway Administration to extend the contract by holding negotiation. In the meantime, the coal transhipment work was shifted to Agra-East Bank with the result that so far as Bharatpur transhipment point was concerned it was limited to crane consignment. The performance of Messrs Chirag & Company was found to be quite satisfactory and it was thought that if open tenders were invited the Railway may have to pay higher rates. The Railway, therefore, decided to negotiate with the Contractor for which a negotiation committee was appointed. The minutes of the negotiation committee show that the fact that the contractors had quoted highly competitive rates in the year 1978 which were lower by 17.73% as compared to the rates allowed to the previous contractor, no reduction was necessary on account of the closure of coal dump at Bharatpur. The Negotiation committee, therefore, recommended that the contract may be extended for a further period of 3 years from 1-2-1981 to 31-1-1984 at the existing rates on a single tender basis for the reasons set out in para 7 of its report. The petitioners have contended that the extension of the contract without any reduction on account of the discontinuance of coal dump at Bharatpur is a clear act of favouritism because under the terms of the contract a fixed mini-mum payment has to he made to the contractor under that head. It was, therefore, submitted by the learned Counsel for the petitioners that the action of the Railway Administration in granting contract at the existing rates without making any reduction on account of the closure of the coal dump resulted in loss to the public exchequer.

20. The petitioners have not stated in their petition the exact amount which the Railway Administration is required to pay to the contractor by way of minimum lump-sum payment. It is true that the Negotiation Committee tried to persuade the contractor to reduce the lump-sum amount under item 'in' for the Bharatpur station to a reasonable level because of the closure of the coal dump, but the contractor did not agree to the same. The contractor pointed out in the course of the negotiation that under the said item there were several other miscellaneous station duties for which they were required to maintain an establishment and incur expenditure. They also pointed out that there was no escalation clause in their contract and thus, unlike other contracts, they had to suffer the increase in the cost of labour. The Negotiation Committee after considering all the aspects recommended the extension of the contract for three years on the existing rates, terms and conditions on a single tender basis for the reasons stated in para 7 of their minutes which read as under:

'(i) The contract agreement provided that 'If any item of work shown in Schedule 'A' is no longer necessary to be performed at any station, the remuneration shown against such items, will be discontinued from the date it is no longer required.' Hence the remuneration under item d (6) is automatically not paid since no work is being done under this item.

(ii) In actual practice, item 'in' does not cover only the item mentioned under this clause but covers very often, many other items. For instance, they have quoted 'free' rates for items (a) and (b) to Schedule 'A' for all the stations in this group.

(iii) In the recent past, most of the tenders have been finalised at increased rates ranging between 30% to 100%. In the contracts given for Agra East Bank group of stations and Sawai Madhopur group of stations, in the adjoining area, an increase of 96% and 128.91% respectively has been granted despite the provision of escalation clause in these contracts.

(iv) The contractors have been working at lower rates that existed in the year 1978, that too obtained at competitive rates of minus 17.73% and they have to run the contract at these rates for coming three years.'

As it was within the competence of the General Manager to extend the lease by another 3 years having regard to the total monetary impact. A note was put up to the General Manager who observed :

'I would like to know the trend of the rates in contracts for which fresh tenders were called in the recent past'.

On the basis of this note the Chief Commercial Superintendent put up a statement in respect of the current contracts controlled by the Headquarters, in the light whereof, taking note of the rising trend in the rates, the General Manager opined that fresh tendering would only be an exercise in futility with the added risk of higher rates being quoted bv the tenderers. Thereupon the General Manager accepted the recommendation of the Negotiation Committee. It is in these circumstances that the Railway Administration ultimately extended the contract by a period of 3 years on the existing rates in favour of Messrs Chirag & Company. We have also noticed while considering the case regarding the Sabarmati transhipment contract that fresh tenders had shown a sharp upward trend and that is also obvious from the statement produced by the Chief Commercial Superintendent which is a part of Annexure XII of the affidavit-in-reply filed by the Railway Administration. In these circumstance it is difficult to say that the Railway Administration has behaved in an unreasonable and arbitrary manner and against the public interest.

21. It was vehemently argued by the learned Counsel for the petitioners of Special Civil Applications Nos. 2161 and 2162 of 1981 that even though they had made a specific averment in para 3 of their petitions that on the closure of Bharatpur Coal dump the Railway Administration ought to have terminated the contract so that it would not have had to pay a fixed lump-sum amount for the remaining period of the contract under that head; in the affidavit-in reply filed in the said two petitions on behalf of the Railway Administration this averment was not specifically denied. The averments made in para 3 of the petition are on the basis of information and belief. These averments have been dealt with in para 3 of the affidavit-in-reply filed by the Chief Commercial Superintendent on behalf of the Railway Administration. No specific reference is to be found to the said averment in the said para of the affidavit-in-reply. However, the contractor hag also filed his affidavit-in-reply and in para 3 thereof this fact has been specifically denied in both the petitions. As stated earlier, the financial impact so far as lump-sum payment is concerned, is not stated by the petitioners and since there is nothing else on record and the averment in the petition is duly denied by the contractor, it is difficult to come to the conclusion that the lump-sum amount was so substantial that the extension of the contract on the same terms and conditions has robbed the public exchequer of a substantial amount which could have been saved, the upward trend in the quotation of rates in respect of similar contracts subsequently entered into, notwithstanding. The onus was on the petitioners to prove their allegation that it was not in public interest to extend the contract by another 3 years and the petitioners have miserably failed to discharge this onus. On the other hand the Railway Administration has made a full and complete disclosure which shows that it acted in public interest and not with a view to favouring the contractor. Even though I have come to the conclusion that so far as the Bharatpur contract is concerned, this Court has no jurisdiction. I have dealt with the merits of the case in brief to make this judgment complete.

22. That takes me to the challenge concerning the Hapa transhipment point contract contained in Special Civil Applications Nos. 1786 and 2394 of 1981. The Viramgam transhipment point was the second biggest transhipment point on the Western Railway next to the Sabarmati transhipment point. With the extension of the Broad Gauge line up to Hapa on the Viramgam-Okha-Porbandar Project, the transhipment point shifted from Viramgam to Hapa some time in June 1980. This brought about a material change in the pattern of traffic as pointed out earlier while dealing with the contract regarding the Sabarmati transhipment point. The Viramgam-Okha-Porbandar Protect was initially expected to be completed within a year or so, but unfortunately the time schedule could not be adhered to. The question of awarding the contract regarding handling work to be carried out at the Hapa transhipment point was, therefore, considered bv a committee of senior officers belonging to different departments of the Railway. The said committee decided to resort to the limited tender method which is one of the recognised methods for awarding contracts. As the Railway Administration was at a transition point so far as Viramgam-Okha-Porbandar Project is concerned, and as it was difficult to predict the pattern of traffic at Hapa the committee felt that the contract could be given only to experienced contractors who had a record of satisfactory execution of such contracts. They, therefore, invited 7 leading and well-known handling contractors to give their quotations. The petitioners were not amongst the 7 contractors. On the basis of the quotations received under this limited tender system, the contract in question was given to Messrs Lotus Handling Company for one year only as it was expected that within that time the Viramgam-Okha-Porbandar Project would be completed and Hapa would cease to be a transhipment point. The contract itself contained a stipulation for its renewal on the same terms and conditions as the Railway Administration was careful enough to visualise the possibility of delay in the completion of the Viramgam-Okha-Porbandar Project, When the project was not completed within one year, the question of granting of extension of the contract arose for consideration and the Railway Administration invoked the renewal clause and extended the contract on the same terms and conditions for another year, It must be remembered that the petitioners did not challenge the procedure of inviting limited tenders adopted in June, 1980 by the Railway Administration, but it was onlv after the Railway Administration invoked the renewal clause and extended the contract for another year that the present petitions came to be filed. It is necessary to remember that ordina-rily a contract is given for three years, but in the instant case it was limited to one year because it was thought that Hapa may cease to be a transhipment point on the completion of Viramgam-Okha-Porbandar Project. But at the same time the possibility of the project being delayed was foreseen and a provision was introduced in the contract for renewal of the contract for a further period on the same terms and conditions. When the project, in fact was delayed and the period of contract was about to end. the Railway Administration invoked the renewal clause and extended the period of contract by another year, within which time they hoped to complete the Viramgam-Okha-Porbandar Project. The extension is on the same terms and conditions and, therefore, so far as the economic aspect is concerned, it cannot be said that the public exchequer is going to suffer by the continuance of the contract. So also in the back-drop of these circumstances it is difficult to say that the Railway Administration had acted in an arbitrary or unreasonable manner. Reference was made to the case of Messrs R. J. Shah & Company in the petition, but it has been pointed out in the affidavit-in-reply how miserably the said firm had failed to carry out its obligations under the contract in the past To my mind, it is not necessary to refer to those detailed averments which are found in the affidavit-in-reply because what is necessary to iudge is whe-ther the Railway Administration has satisfied the twin test for upholding its action. I am, therefore, of the opinion that the challenge in so far as this contract is concerned, is also without sub-stance.

23. Before I part, I must mention that in this group of petitions reliance has been placed by the petitioners on certain letters written to the Railway Minister by Shri Amarsinh Rathwa, Member of Parliament. The affidavit of Shri Rathwa has not been filed. What Shri Rathwa stated in his letter to tha Railway Minister is presumably on in-formation supplied by the petitioners or others in their line. The allegations in the letter of Shri Rathwa cannot carry the case of the petitioner any further, I have, therefore, not considered il necessary to refer in detail to those allegations because, they are also tha subject matter of the allegations mada In this group of petitions.

24. For the above reasons, I am of the opinion that there is no merit in this group of petitions and the petitions must, therefore, fail. Rule in each petition is discharged with costs. The Interim relief in each petition stands vacated.


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