The court affirmed that private contractors do not have a fundamental right to government contracts, allowing the State to exercise discretion in awarding contracts while promoting collective interests through co-operative societies.

Headnote:(A) Constitution of India - Articles 13(2), 13(3), 14, 15(5), 19(6) - Challenge to government orders granting price preference to labour societies - Executive orders challenged on grounds of violating fundamental rights of private contractors - Court held that individual contractors do not have a fundamental right to demand government contracts and the State has the authority to award contracts as per policy - Fairness and equality of opportunity under Article 14 must be maintained, yet the State can promote collective interests through co-operative societies without creating arbitrariness. (Paras 1-25)

(B) Economic justice - Concept of welfare State emphasizes obligation of the State to ensure equitable distribution of resources to enhance livelihood for all citizens - Economic policies must align with constitutional objectives rather than revenue maximization - The role of co-operative societies in promoting economic justice is recognized. (Paras 11-20)

(C) Judicial review - The court cannot interfere with State policy unless it is manifestly arbitrary. The challenges laid by private contractors against preferential treatment to labour societies were dismissed. (Paras 6-8)

Facts of the case:
This judgment addresses multiple writ appeals and petitions contesting government orders that accord price preference to labour contract societies, which were argued to violate the fundamental rights of private contractors, claiming issues of fairness and equality in the award of government contracts.

Findings of Court:
The Court confirmed the legitimacy of the State's policy to promote labour societies through preferential tender processes, maintaining that this does not infringe upon fundamental rights as no right to contract with the State is guaranteed.

Issues: The main issues addressed were whether the executive orders violated the fundamental rights of private contractors and whether the State could enforce policies favoring co-operative societies.

Ratio Decidendi: The court ruled that no individual right to contract exists against the government, and State can exercise discretion in awarding contracts to advance social welfare objectives.

Result: Writ appeals and petitions dismissed.

JUDGMENT

A.Muhamed Mustaque, J.

These matters raise a challenge to government orders that grant preference to labour contract societies up to 10% over the quoted amount of the lowest bidder. These matters are at the instance of private contractors and are arising from writ petitions negating the challenge by the learned Single Judge. Additionally, there are fresh writ petitions contesting the government orders and consequential stipulations in the notice inviting tenders. Since the questions to be considered in all these matters are the same, it is appropriate that all these cases are disposed of by a common judgment.

2. The Government of Kerala, by an order dated 13/11/1997 decided to accord preference to labour societies. In that Government order, the maximum value of the work at a time that can be undertaken by ’A’ class society is for an amount of Rs.50 lakhs, ’B’ class society is Rs.30 lakhs and ’C’ class society is Rs.10 lakhs. The labour society will have a preference for the award of the work if their tender is up to 10% of the lowest tender. It outlined eligibility conditions such as a minimum 50 labourers as actual members of society and sympathisers up to 10% of the actual membership. Subsequently, through another order dated 19/3/2004, the Government stated that labour societies are not eligible for any price preference for the contract administered by the Public Works Department (PWD). Thereafter, another order of the Government dated 2/8/2008 restored the priority benefits of the Government order dated 13/11/1997 to the Uralungal Labour Contract Co- operative Society Ltd. (hereinafter referred to as “ULCCS”) without any restriction on financial limits. Furthermore, the PWD Department issued another order dated 19/3/2020 allowing labour contract societies subject to class of registration, to participate in tenders floated by the Government with eligibility for price preference up to 10% over the quoted amount of the lowest bidder. On 4/11/2020, the Co-operative Department of the Government issued another order on a request from the Managing Director of ULCCS to undertake all types of work on preferential treatment. Accordingly, the Government granted sanction to ULCCS to have preference of work in the light of government order dated 13/11/1997. The Government by an order dated 13/6/2023 exempted ULCCS from producing eligibility certificates, in the light of the fact that the above society has been recognised as an accredited agency by the Government.

3. In the matters pertaining to writ appeals, the challenges were raised against these orders. The learned Single Judge negated the challenge, holding that the preference is given to the ULCCS as a matter of State policy and does not involve any infringement of fundamental rights in this matter. Some of the writ petitions raising similar challenges have also been tagged. These writ petitions raised additional challenges to the subsequent government orders that modified the PWD manual to ensure preference for labour societies, especially ULCCS.

4. We heard the matter in detail. We heard Shri Santhosh Mathew who appeared for the appellant in the writ appeals and for the writ petitioner a Builders Association of India and others in W.P.(C).No.27723/2023 and connected writ petitions. We heard Shri Haris Beeran, who appeared for the writ petitioner in W.P (C) 23696/2023. We also heard the learned Advocate General Shri K.Gopalakrishna Kurup and Shri M.Sasindran who appeared for ULCCS. While the writ petitions and appeals pertain to certain awarded and proposed contracts, we will not delve into the specifics of each contract, as they all hinge on the substantial challenge raised against the government order giving price preference to ULCCS in the government order.

Submissions:

5. The learned counsel, Shri Santhosh Mathew, submitted that the government orders are arbitrary and illegal. Firstly, on the ground that the fundamental rights of private contractors have been violated by ex

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2024 Supreme(Online)(Ker) 67670

The court affirmed that private contractors do not have a fundamental right to government contracts, allowing the State to exercise discretion in awarding contracts while promoting collective interests through co-operative societies.

Cases Referred (10)