The central legal point established in the judgment is the obligation of the State to act fairly and without discrimination in awarding contracts, and the authority's discretion to reject tenders based on valid reasons.

V. Sivaraman Iyer, J.

1. Petitioner who claims to be an experienced contractor with good reputation, having sufficient resources, tools etc., and to have satisfactorily completed various contracts under the Government and other Public Sector Undertakings, had submitted his tender pursuant to Ext. P-1 notification issued by the first respondent. Petitioner had complied with all the terms of Ext. P-1 having purchased the tender form on payment of Rs. 100 deposited Rs. 20,000 as earnest money and submitted its tender forms before the last date viz., 26th September 1985. There were 11 tenderers, including the petitioner. The tenders were opened at 3-30 p.m. on 27th September 1985 before the first respondent. The offers made by the tenderers ranged from Rs. 8,69,000 to Rs. 44,00,000 for the same work. Petitioner's was the second lowest tender, Rs. 14,31,500. On 19th November 1985, petitioner received Ext. P-2 letter, requiring him to furnish further particulars like detailed procedure to be adopted by the petitioner for cleaning the pond within the stipulated time, details of equipments owned by it to be deployed for the job like, dredgers, excavator loaders, tippers pumps etc., number of personnel to be deployed on the job including supervisory staff, and its lowest revised offer for execution of the job. Petitioner is said to have furnished all the details. Since the petitioner was executing the same work under work order No. 13 of 1985 on a tonnage basis, he made Ext. P-3 submission requesting that he may be permitted to resume the work on the usual terms. Petitioner stated that substantial investments had been made by him to carry on the work. Petitioner submits that notwithstanding his reply to Ext. P-2 and the request contained in Ext. P-3 the second respondent, who had not tendered for the work, was chosen for the award of the contract. Petitioner asserts that the second respondent had not complied with any of the conditions contained in Ext. P-1 notification. He maintains that the first respondent, though registered as a company, is an instrumentality of the State, and therefore answers the definition of Article 12 of the Constitution of India. It is the further case of the petitioner that the first respondent is bound to act reasonably and not arbitrarily in the matter of award of contracts. Reference is made to the decisions of the supreme court reported in A.I.R. 1974 S.C. 266, and A.I.R. 1979 S.C. 1628, to make out that even in the matter of award of contracts, the State and its instrumentalities should act fairly, without discrimination, and without unfairness. Award of the contract to the second respondent, notwithstanding the fact that the respondent had not offered its tender pursuant to Ext. P1, being in total disregard of the standards fixed for award of the contract, is said to be arbitrary and discriminatory and vitiated by absence of good faith. Petitioner, therefore, seeks the issue of a writ of mandamus directing the first respondent to forebear from awarding the work to anybody other than those who had duly submitted tenders in accordance with the stipulations contained in Ext. P1, to consider the tender of the petitioner on its merits and with fairness, and award the work to the petitioner.

2. The defence of the first respondent to the plea against award of the work in favour of the second respondent is quite simple. Ext. P-1 notification is said to have been issued since manual operations of removal of sludge from the cooling pond were found to be unsatisfactory. As per work order dated 16th March 1985, the petitioner was awarded the work of removal and transportation of sludge with the stipulation that the work should be completed by 30th April 1985. Petitioner could not keep up the target. It could not improve its performance in spite of letter dated 9th April 1985. A further letter dated 20th May 1985 also did not evoke any favourable response. The work was, therefore, stopped by communication dat