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1981 Supreme(All) 18
IN THE HIGH COURT OF ALLAHABAD
M. N. Shukla and K. M. Dayal, JJ.
YADAV MEDICAL STORE, ALLAHABAD - Appellant
Versus
STATE OF UTTAR PRADESH - Respondents
Civil Misc. Writ 5876 Of 1980
Decided On : 01/08/1981
A.N.BHARGAVA, B.P.Bhargava, R.R.Yadav, S.K.Misra
The government and its agencies are subject to the mandate of Article 14 of the Constitution and cannot act arbitrarily in awarding contracts. Acceptance of a tender in violation of the standard or norms of eligibility set out in the tender notice would be invalid.
Headnote:
TENDER - ELIGIBILITY - CONDITIONS - VIOLATION - ARBITRARINESS - INVALIDITY - EQUALITY CLAUSE - ARTICLE 14 - GOVERNMENT CONTRACTS - ADMINISTRATIVE LAW - JUDICIAL REVIEW - PUBLIC INTEREST - REASONABLENESS.
Fact of the Case:
A tender notice invited bids for supplying medicines to a hospital, specifying conditions of eligibility, including possession of a local shop and a license for drug sales. The petitioner and respondent No. 3 submitted tenders, with the petitioner quoting a higher rate. The hospital accepted respondent No. 3's tender, despite their lack of a local shop and drug license at the time of tender submission.
Finding of the Court:
The court held that the hospital's acceptance of respondent No. 3's tender was arbitrary, violative of the equality clause under Article 14 of the Constitution, and invalid. It emphasized that the government and its agencies are subject to the mandate of Article 14 and cannot act arbitrarily in awarding contracts.
Issues: 1. Whether the hospital's acceptance of respondent No. 3's tender violated the conditions of eligibility set out in the tender notice. 2. Whether the hospital's action was arbitrary and violative of the equality clause under Article 14 of the Constitution.
Ratio Decidendi: 1. The court interpreted the tender notice's conditions of eligibility strictly, holding that possession of a local shop and a drug license were essential requirements for tender submission. Respondent No. 3's failure to meet these conditions at the crucial date of tender submission rendered their tender ineligible. 2. The court applied the principles of administrative law and recent Supreme Court precedents to emphasize that the government and its agencies are subject to the mandate of Article 14 and cannot act arbitrarily in awarding contracts. The hospital's acceptance of respondent No. 3's tender, despite their ineligibility, was deemed discriminatory and violative of the equality clause.
Final Decision: The court quashed the hospital's order accepting respondent No. 3's tender and directed the hospital to consider the petitioner's tender in accordance with the tender notice's conditions.
M. N. SHUKLA, J.
( 1 ) THIS writ petition raises some constitutional and legal questions of considerable importance. The phenomenon has been noticed by jurists as well as Courts which have had occasion to decide such matters, that the ramifications of governmental functions and State activities in this era of welfare State are fast expanding. A necessary concomitant of this is the anxiety to keep the state within bounds and not permit it in the course of its stride to ride rough shod over certain well established guarantees and safeguards enjoyed by the people. This has resulted, inter alia, in importing some salutary inhibitions even in the realm of administrative law which until sometime ago was regarded as comparatively immune from constitutional restraints. The development of this aspect of law is clearly revealed in cases where the State indulges in such activities as carrying on business, making of a contract etc. , functions which are undertaken by the State obviously in the exercise of its statutory or executive authority.
( 2 ) THE instant case arises out of a contest between rival tenderers for supplying medicines to the swarup Rani Nehru Hospital, Allahabad (hereinafter described as the hospital ). Tenders were invited for supplying medicines to the Hospital for the year 1980-81. An advertisement was inserted in the newspaper on 5-3-1980 and 7-3-1980, saying that the last date for submitting the tenders was 20th of March 1980, till 11. 30 A. M. and that all the tenders offered would be opened at 3 P. M. on the same day. It is significant that the advertisement also said that full particulars could be obtained from the office of the Senior Medical Superintendent of the hospital. A copy of the notice of tender was affixed on the Notice Board of the office of the Senior Medical superintendent. It has been filed as Annexure-I to the writ petition and is the bed-rock of the petitioners entire case. It is not disputed that the conditions of the tender have been incorporated in this notice. A perusal of the same would indicate that a tenderer who intends to submit his tender must satisfy certain objective tests:--
(i) The tenderer in medicine must have a local medical shop. (ii) He must be a registered and licenced drug dealer and must produce proof of the same along with the tender of medicines. (iii) Only those who hold licence for all drugs including dangerous drugs should submit tender for medicines (it may be noted that the requirements about holding a licence for dangerous drugs was not enforced.) and (iv) Tenders would be opened in the office of the Senior Medical superintendent on 20th March 1980, at 3 P. M. in the presence of such tenderers of their authorised representatives, who may choose to attend. Tenders for supply of drugs will be accepted from registered and licenced drugs dealers only, who also hold licence for dangerous drugs and they must produce proof of the same.
( 3 ) THE petitioner as well as opposite party No. 3, namely, M/s. National Medical Stores, fatehpur submitted their tenders within the date prescribed. While the rate quoted by the petitioner in their tender was 17. 6% the rate quoted by the opposite party No. 3 was 8. 62 per cent. The tenders were opened on 20th March 1980 and according to the allegations of the petitioner the tender submitted by him was orally accepted and he was directed to supply the medicines to the hospital with effect from 1st of April, 1980. However, on 16th July, 1980, the petitioner received a letter from respondent No. 2, the Senior Medical Superintendent to the effect that the contract of medicines had been finalised and another contractor, i. e. , opposite party No. 3, had been appointed for the supply of medicines for the year 1980-81 and he would start supplying the medicines to the hospital with effect from 19th April 1980. The petitioner supplied medicines only upto July 1980, and not thereafter. It was alleged that the petitioner satisfied all the conditions
