2021 Supreme(AP) 63

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
M. GANGA RAO, J.
M/s. Murali Manpower Agencies - Petitioner
Versus
State of Andhra Pradesh - Respondent
Writ Petition Nos. 23012 & 24101 of 2020
Decided On : 19-02-2021

Point of law: in the exigencies and the requirements of the State, the State can resort to award the contract on nomination basis and insisting the State in all circumstances to award the contract on tender basis cannot be said to be exercise of the executive power in an arbitrary manner and wisdom and advisability of economic policy are ordinarily not amenable to judicial review

Headnote:

Constitution of India, 1950 – Article 14 – Performance of the contractor – Tender – Case of the petitioner is that the 2nd respondent issued a tender notice vide inviting tenders for empanelment of Outsourcing Agencies for providing various kinds of personnel to the 2nd respondent – Andhra Pradesh Mineral Development Corporation Limited on outsource basis. – The petitioner had participated in the e-tender process. – It’s tender was accepted by the 2nd respondent. – Accordingly, a letter of Award was issued to the petitioner. – The petitioner had submitted a performance bank guarantee for an amount of Rs.64.56 lakhs as per the terms and conditions of the tender document. – Thereafter, an agreement has been entered between the parties. – As per the agreement, the duration of the agreement is for a period of six months. – However, upon satisfactory performance, the agreement can be extended for a further period of six months at the discretion of the APMDC. – The performance of the petitioner was found highly satisfactory by the 2nd respondent and the same is evident from the letter issued in that regard. – From 05.09.2019, the date of agreement, the petitioner has been discharging its contractual duties at 400 sand reaches and stock yards by engaging nearly 2000 persons. – During the agreement period, with mutual consent of both the parties, the agreement has been amended whereby clause Nos.3(a) and (b) have been amended and the initial tenure of the agreement has been extended to one year from six months and the further extension has been modified to a minimum period of one year from six months and maximum period of three years, upon satisfactory performance of the contractor. – The necessary infrastructure like huts at the work site, uniforms etcetera are being provided to the personnel by the petitioner at huge cost. – The petitioner is entitled to the reimbursement of the expenditure incurred by providing infrastructure at the work site. – In fact the District Sand Officers of the 2nd respondent have recommended for payment of additional allowance towards the infrastructure provided by the petitioner. – The petitioner raised a claim towards the same amounting to Rs.7.22 Crores and submitted the same to the 2nd respondent. – After the expiry of the initial period of one year, as per the terms of the amended clause 3(b) of the agreement, the petitioner has a right for extension of contract period by one to three years. – The initial period of one year came to an end by 04.09.2020. – As no decision is taken by the 2nd respondent for renewal of the contract beyond 04.09.2020, the petitioner was constrained to address a letter to the 2nd respondent seeking return of the bank guarantee. – However, due to contractual obligations, the petitioner continued to provide services at the sand reaches and stock yards through its personnel. – The 2nd respondent has accepted for the same, which could be construed that the contract period has been impliedly extended. – The petitioner recently came to know that the 2nd respondent is proceeding with awarding the contract in favour of a third party.

Finding of court: If the 2nd respondent is of the opinion that going for tender process would only be uneconomical for such a short term, it ought to have utilised the services of the petitioner, as per amended clause 3(b) of the agreement, on the same terms instead of awarding the contract to the 3rd respondent without calling for tenders and on nomination basis, on the terms and conditions which are prejudicial to the interest of the public exchequer. – When the decision of the 2nd respondent suffers from arbitrariness, the said action is subject to judicial review. – Hence, the contra contention of learned standing counsel that the work of supply of outsourcing contract is entrusted to the 3rd respondent by way of nomination basis for a short period as the 2nd respondent thought that it is uneconomical for short period to call for tenders and in the exigencies of the state in all circumstances the state cannot resort for entrustment of the work on tender basis merits no consideration and reliance placed on the decision in Villianur’s case (supra) does not support the contention of the learned standing counsel, as fact situation therein is different to that of the present case. – Entrustment of the work of supply of man power to the 3rd respondent by way of nomination basis for a period of 6 months, even though with the condition that the contract shall be co-terminated along with the upgraded sand policy-2019, on payment of service charges @ 0.5% on the huge amounts payable to the employees is highly illegal and arbitrary. – Accordingly, the awarding of contract to the 3rd respondent is set aside and the respondents 1 & 2 are directed to forthwith take steps to call for tenders to award the subject contract and conclude the tender process as per law.

Result: Writ Petition Allowed