2006 Supreme(SC) 1257

2007(1) Supreme 704
SUPREME COURT OF INDIA
(From Allahabad High Court)
S.B. Sinha and Markandey Katju, JJ.
Nagar Nigam, Meerut—Appellant
versus
Al Faheem Meat Exports Pvt. Ltd. & Ors.—Respondents
Civil Appeal No. 5673 of 2006
(Arising out of SLP (Civil) No. 10174 of 2006)
Decided on 7-12-2006
Counsel for the Parties :
For the Appellant : Jayant Bhushan, Sr. Advocate, Nagendra Singh and Vishwa Pal Singh, Advocates.
For the Respondents : Dinesh Dwivedi, Sr. Advocate, Ashish Mohan, Geetanjali Mohan, Ankur Chawla, Jayant Mohan, Ms. Ruby Singh Ahuja, S.W.A. Qadri, Mohd. Fuzail Khan and Kamlendra Mishra, Advocates.

IMPORTANT POINT
As the maintenance and setting up of a slaughter house (abattoir) is a statutory responsibility of the Municipal Corporation, the question who should be given the contract for the slaughter house and on what terms, is for the Municipal Corporation to decide, and not for the Courts. All that the Courts can do is to ensure that there is no arbitrariness on the part of the Municipal authorities.

Headnote:(i) Uttar Pradesh Municipal Corporation Adhiniyam, 1959—Sections 422 and 423—Slaughter Houses—Powers and duties of Municipal Corporation in maintenance and regulation of—Statutory obligation on part of Municipal Corporation to build and/or maintain a hygienic slaughter house—Question as to who should be given the contract for the slaughter house and on what terms, is for the Municipal Corporation to decide, and not for the Courts—All that the Courts can do is to ensure that there is no arbitrariness on the part of the Municipal authorities—Court can ensure that the statutory functions are not carried out at the whims and caprices of the officers of the government/local body in an arbitrary manner—But the Court cannot itself take over these functions—Constitution of India—Articles 14 and 21.

       Held : Indisputably Appellant-Corporation is a State within the meaning of Article 12 of the Constitution of India. It was constituted under the said Act which was enacted with a view to ensure better municipal governmence of the cities in the State of Uttar Pradesh. The statutory obligation on the part of the Municipal Corporation to build and/or maintain a hygienic slaughter house is not open to question. We have noticed hereinbefore that in terms of Sections 422 and 423 of the Act, the Corporation has various options. Such options, however, must be exercised by the Nagar Nigam itself having regard to the statutory scheme with a view to maintain public hygiene, but the same must be done in the light of the doctrine of life and liberty of a citizen as adumbrated under Article 21 of the Constitution. Such options cannot be exercised by the High Court, as that is no part of its functions. Maintenance and setting up of a slaughter house (abattoir) is a statutory responsibility of the Corporation.(Para 11)

       (ii) Uttar Pradesh Municipal Corporation Adhiniyam, 1959—Sections 422 and 423—Slaughter Houses—Grant of licence to respondent to run a slaughter house owned by Nagar Nigam, Meerut —Licence expired on 8-1-2005— Policy decision to modernise slaughter houses—Impugned advertisement dated 6-12-2004 issued by appellant Corporation inviting applications for granting a fresh contract for running the slaughter house—Writ petition filed by respondent challenging validity of the advertisement—High Court allowed the writ petition directing that respondent should be allowed to run the slaughter house for 10 years on terms and conditions stipulated therein—Whether High Court was empowered to interfere with the said advertisement—(No)—There being no arbitrariness, discrimination or malafides in it—Statutory obligations of Corporation—Constitution of India—Article 226.

       Held : This Court time and again has emphasized the need to maintain transparency in grant of public contracts. Ordinarily, maintenance of transparency as also compliance of Article 14 of the Constitution would inter alia be ensured by holding public auction upon issuance of advertisement in the well known newspapers. That has not been done in this case. Although the Nagar Nigam had advertised the contract, the High Court has directed that it should be given for 10 years to a particular party (respondent No. 1). This was clearly illegal.(Para 13)

       It was not for the High Court to fix the terms and conditions of the Contract. It is for the state authorities to take a policy decision and fix the terms and conditions of the Contract. It is one thing to say that the High Court in exercise of power of judicial review may strike down the contract or a notice inviting the tender if it offends Article 14 of the Constitution of India, but it is another thing to say that the High Court in exercise of the power of judicial review would thrust a contract upon a non-willing party particularly when the said exercise would be violative of Article 14 of the Constitution. Yet again, save and except in some very rare and exceptional case, the question of fixing any terms of the Contract or laying down the terms and conditions is for the concerned authority to decide, and it is not a matter within the domain of the Courts.(Para 20)

       In the present case, the respondent no.1 challenged the impugned advertisement dated 6.12.2004 issued by the Nagar Nigam. We have carefully perused the said advertisement and find no illegality in the same. It has been held by this Court in several decisions that the Court should not ordinarily interfere with the terms mentioned in such an advertisement.(Para 21)

       We have carefully perused the impugned advertisement and we do not find any arbitrariness, discrimination or malafides in the same. Hence the High Court had no justification for interfering with the said advertisement.(Para 23)

       For the reasons aforementioned, we have no other option but to hold that the impugned judgment is unsustainable. It is set aside accordingly. The question, however, arises what direction should be passed by us now, considering the fact that the impugned advertisement was issued on 6.12.2004. We think that the interest of justice would be subserved if the appellant Corporation is directed to issue an advertisement in well known newspapers having wide circulation again calling for bids on such terms and conditions which it may find to be reasonable within six weeks from the date of communication of this order. The bids offered pursuant thereto must be opened and a final decision must be taken within eight weeks thereafter.(Para 24)

       (iii) Constitution of India—Articles 226, 14 and 21—Writ jurisdiction—Scope to interfere in an administrative action of the State—Need to maintain transparency in grant of public contracts—Ordinarily all contracts by the Government or by an instrumentality of the State should be granted only by public auction or by inviting tenders, after advertising the same in newspapers—Administrative Law—Scope of judicial review.

       Held : The High Court undoubtedly exercises a wide jurisdiction under Article 226 of the Constitution of India. The jurisdiction of the High Court to entertain an application in the nature of a public interest litigation is well-known but it is also trite that the court should exercise its jurisdiction only when it is essential to do so. It is also trite that ordinarily the High Court would not interfere in an administrative action of the State unless it is inter alia found to be contrary to a legislative policy or arbitrary attracting the wrath of Article 14 of the Constitution of India. The jurisdiction of the High Court is limited in this regard.(Para 8)

       It is now a well settled principle of law that having regard to the provisions of Article 14 of the Constitution of India, a State within the meaning of Article 12 thereof cannot distribute its largesse at its own sweet will, vide R.S. Shetty vs. Union of India, AIR 1979 SC 1628. The Court can ensure that the statutory functions are not carried out at the whims and caprices of the officers of the government/local body in an arbitrary manner. But the Court cannot itself take over these functions. (Para 12)

       It is well settled that ordinarily the State or its instrumentalities should not give contracts by private negotiation but by open public auction/tender after wide publicity. In this case the contract has not only been given by way of private negotiation, but the negotiation has been carried out by the High Court itself, which is impermissible. We have no doubt that in rare and exceptional cases, having regard to the nature of the trade or largesse or for some other good reason, a contract may have to be granted by private negotiation, but normally that should not be done as it shakes the public confidence.(Paras 14 and 15)

       The law is well-settled that contracts by the State, its corporations, instrumentalities and agencies must be normally granted through public auction/public tender by inviting tenders from eligible persons and the notification of the public-auction or inviting tenders should be advertised in well known dailies having wide circulation in the locality with all relevant details such as date, time and place of auction, subject-matter of auction, technical specifications, estimated cost, earnest money Deposit, etc. The award of Government contracts through public-auction/public tender is to ensure transparency in the public procurement, to maximise economy and efficiency in Government procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution. However, in rare and exceptional cases, for instance during natural calamities and emergencies declared by the Government; where the procurement is possible from a single source only; where the supplier or contractor has exclusive rights in respect of the goods or services and no reasonable alternative or substitute exists; where the auction was held on several dates but there were no bidders or the bids offered were too low, etc., this normal rule may be departed from and such contracts may be awarded through ‘private negotiations’.(Para 16)

       (iv) ADMINISTRATIVE LAW—Public Contracts—Procedure for grant of—Scope of judicial review—Judicial restraint in reviewing the administrative action—Ordinarily all contracts by the Government or by an instrumentality of the State should be granted only by public auction or by inviting tenders—Ordinarily the High Court would not interfere in an administrative action of the State unless it is inter alia found to be contrary to a legislative policy or arbitrary—Jurisdiction of the High Court is limited in this regard—Constitution of India—Article 226.

       Held : The law is, thus, clear that ordinarily all contracts by the Government or by an instrumentality of the State should be granted only by public auction or by inviting tenders, after advertising the same in well known newspapers having wide circulation, so that all eligible persons will have opportunity to bid in the bid, and there is total transparency. In our opinion this is an essential requirement in a democracy, where the people are supreme, and all official acts must be actuated by the public interest, and should inspire public confidence.(Para 18)