w w w . L a w y e r S e r v i c e s . i n



International Commerce Limited & Another v/s Union of India & Others


Company & Directors' Information:- INDIA E-COMMERCE LIMITED [Active] CIN = L99999MH1968PLC014091

Company & Directors' Information:- INTERNATIONAL COMMERCE LIMITED [Active] CIN = U10100WB1980PLC204139

Company & Directors' Information:- S H COMMERCE PRIVATE LIMITED [Active] CIN = U51109WB2008PTC121420

Company & Directors' Information:- A. M. COMMERCE PRIVATE LIMITED [Active] CIN = U51909WB2011PTC168744

Company & Directors' Information:- G S E-COMMERCE PRIVATE LIMITED [Active] CIN = U52100KA2013PTC067567

Company & Directors' Information:- V K COMMERCE PVT LTD [Amalgamated] CIN = U51109WB1984PTC037122

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- P. R. COMMERCE PRIVATE LIMITED [Active] CIN = U51909WB2008PTC122333

Company & Directors' Information:- M & P E. COMMERCE PRIVATE LIMITED [Active] CIN = U74300DL1999PTC099198

Company & Directors' Information:- R S COMMERCE PVT LTD [Converted to LLP] CIN = U51909WB1995PTC074372

Company & Directors' Information:- P S COMMERCE PRIVATE LIMITED [Active] CIN = U51909WB1997PTC084487

Company & Directors' Information:- AND E-COMMERCE PRIVATE LIMITED [Active] CIN = U74120AP2015PTC096206

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- A P COMMERCE LIMITED [Strike Off] CIN = U51909WB1981PLC033798

Company & Directors' Information:- K P INDIA COMMERCE PRIVATE LIMITED [Strike Off] CIN = U51909AS2001PTC006701

Company & Directors' Information:- I P E-COMMERCE PRIVATE LIMITED [Active] CIN = U52399CH2012PTC033585

    W.P. No. 33074 (W) of 2013

    Decided On, 25 January 2019

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE DEBANGSU BASAK

    For the Appearing Parties: Partha Sarathi Sengupta, Jaydip Kar, Utpal Bose, L.K. Gupta, Sr. Advocates, D.N. Sharma, Ratnesh Kr. Rai, Anunoy Basu, Srinjoy Bhattacharyya, D.N. Ray, Arpa Chakraborty, Kamal Kr. Chattopadhyay, Tapas Kr. Banerjee, Arjun Ray Mukherjee, Saheli Mukherjee, Advocates.



Judgment Text

The petitioners have assailed the process of granting contracts on nomination basis to the respondent nos. 5 and 6 by the respondent no. 2 as also the decisions to do so.

Learned Senior Advocate appearing for the petitioners has submitted that, award of contract on nomination basis cannot be done. He has referred to 2007 Volume 11 Supreme Court Cases (32) (Caterpillar India (P) Ltd. v. Western Coal Fields Ltd. & Ors.) and submitted that, the Supreme Court had issued certain directions upon the Central Government requiring an exercise to be undertaken to find out whether, purchase preference can be given in the matter of award of contract to public sector enterprises or not. In terms of the directions issued by the Supreme Court in Catarpillar India (P) Ltd. (supra), the Central Government had formed a committee by a writing dated March 24/25, 2008. Such committee had submitted a report dated May 14, 2008. The report had dealt with the respondent no. 5. The report had noted, the respondent no. 5 is a separate legal entity. It had stated that, for a long time solution, the respondent no. 5 may be converted into a subsidiary of the respondent no. 2 or a joint venture of the respondent no. 2 along with other companies.

Learned Senior Advocate for the petitioners has submitted that, the respondent no. 6 by a writing dated January 29, 2008 had sought clarification from the Ministry of Steel as to whether award of slag processing on nomination basis to the respondent no. 5 was permissible or not. It sought guidelines from the Ministry of Steel by the writing dated January 29, 2008. Such a situation received theconsideration of the Steel Minister which is referred to a writing of the Steel Ministry dated February 11, 2010 where the Steel Minister had expressed the view that, he was not entirely convinced about grant of contract on nomination basis although there were some merits in the contention for such grant. The Steel Minister had opined that, the matter should be referred to the Central Vigilance Commission (CVC) and their comments should be obtained as to whether respondent no. 2 can continue to award work to the respondent no. 5 on nomination basis or not. According to him, the Minister himself did not take a decision as to whether award of contract can be given on nomination basis to the respondent no. 5. In fact, the Minister expressed a view that the same should not be done. He has thereafter referred to the office memorandum dated April 23, 2010 issued by CVC. According to him, CVC by such office memorandum reviewed the Purchase Preference Policy for production services of Central Public Sector Enterprises in view of the judgment of the Supreme Court rendered in Caterpillar India (P) Ltd. (supra). By the office memorandum, CVC clarified that, awarding of contracts on nomination basis is different from price preference. Award of contract to the respondent no. 5 on nomination basis would not be correct. However, if a special dispensation for awarding works to the respondent no. 5 is justified then the Ministry has to obtain the approval of the Government of India.

Learned Senior Advocate appearing for the petitioners has referred to the views of CVC on award of contract on nomination basis. He has referred to the Office Memorandum dated October 20, 2003, Circular No. 15/5/06 dated May 9, 2006, Office Order No. 23/7/07 dated July 5, 2007, Circular No. 18/12/12 dated December 11, 2012, Circular No. 31/10/09 dated November 5, 2009 issued by CVC. He has also referred to the letters dated April 13, 2010 and March 16, 2010 written by the respondent no. 2 to CVC and submitted that, neither CVC nor the respondent no. 2 had taken a decision that, award of contract would be given on nomination basis.

Learned Senior Advocate for the petitioners has referred to the conduct of the respondent no. 2 with regard to award of contract for slag handling. He has submitted that, despite CVC requiring the respondent no. 2 to award contract on a transparent basis, the respondent no. 2 continued to grant contracts to the respondent no. 5 on nomination basis. Being aggrieved, the petitioner approached the Writ Court by way of a writ petition being W.P. No. 14902 (W) of 2013 (International Commerce Limited and Anr. v. Union of India Anr. Ors.). During the pendency of such writ petition, the respondent no. 2 published an invitation for expression of interest for handling and processing slag and recovery/processing of metallic from slag on June 15, 2013. The petitioners thereafter withdrew W.P. No. 14902 (W) of 2013 with liberty to file afresh, if the needs to do so arises, in view of such notification for expression of interest dated June 15, 2013 issued by the respondent no. 2. However, immediately, upon the writ petitioners withdrawing the writ petition, the respondent no. 2 cancelled the invitation for expression of interest. Therefore the writ petitioners had to approach the Writ Court once again through this writ petition.

Referring to 2006 Volume 13 Supreme Court Cases page 382 (Nagar Nigam, Meerut v. Al Faheem Meat Exports Pvt. Ltd. & Ors.) learned Senior Advocate for the petitioners has submitted that, Government largesse has to be given in a transparent manner. Public auction for grant of government largess is one of the manners in which transparency of such grant is maintained. In the present case, the respondent no. 2 must be directed to grant contracts for handling slags in a transparent manner by public auction. According to him there is no material on record justifying the award of contract on nomination basis to the respondent no. 5. The respondent no. 2 is obliged to act in a manner so as not to violate the provisions of Article 14 of the Constitution. Action of the respondent no. 2 in awarding contracts on nomination basis to the respondent no. 2 violates Article 14 of the Constitution. Such actions should be quashed.

Learned Senior Advocate appearing for the respondent nos. 2 and 4 opposing the writ petition has submitted that, CVC had allowed grant of contract on nomination basis to the respondent no.

5. In support of the contention that, CVC had granted permission to award contract on nomination basis, he has referred to and relied upon Circular No. 31/10/09 dated November 5, 2009. Referring to Caterpillar India (P) Ltd. (supra) he has submitted that, the Supreme Court did not say that, no contract can be awarded on nomination basis. Rather Caterpillar India (P) Ltd. (supra) had directed the authorities to undertake certain exercises. Such exercises as directed by Caterpillar India (P) Ltd. (supra) were undertaken at the requisite level. He has relied upon the report of the committee on Purchase Preference Policy for the respondent no. 5 dated May 14, 2008 and particularly, to the various passages therein, where the report notes the unique features of the respondent no. 5 and the beneficial existence of the respondent no. 5 vis--vis the respondent no. 2 in slag handling. He has submitted that, the symbiotic relationship between the respondent nos. 2 and 5 so far as slag handling is concerned, is mutually beneficial. Since two Public Sector Undertakings stand benefitted out of a mutually beneficial relationship, it cannot be said that such a relationship is contrary to public interest. The relationship is founded upon grant of contracts by the respondent no. 2 to the respondent no. 5 on nomination basis. There are greater advantages in such grant of contracts on such basis to the respondent no. 5 which outweighs any other consideration.

Learned Senior Advocate appearing for the respondent nos. 2 and 4 has referred to a writing dated August 28, 2008 and submitted that, preferential purchase policy for product and services of the respondent no. 5 have been laid down therein. He has referred to paragraph 3 of such writing and submitted that, the competent authority had decided that, the respondent no. 5 will continue to be awarded the work of metallic slag recovery and other work like slag processing on nomination basis by other Public Sector Units under the Ministry of Steel. He has referred to a writing dated April 23, 2010 issued by the Central Vigilance Commission and submitted that, CVC has expressed the view that, awarding contracts on nomination basis is different from price preference. CVC had opined that, if special dispensation for awarding works to the respondent no. 5 is justified then the Ministry has to get the approval of the Government of India. He has submitted that, the approval of the Government of India in awarding contract on nomination basis appears from the writing dated August 28, 2008. Therefore, according to him, a policy of protective discrimination can be garnered from the writing dated August 28, 2008. A policy of protective discrimination is permissible under the provisions of the Constitution of India. Constitution of India contemplates exceptions to Article 14. He has referred toArticle 15, 16 and 19(6) of the Constitution and submitted that, the same can be construed to be exceptions to Article 14 of the Constitution. According to him, the right to equality is subject toreasonable restrictions that may be prescribed in accordance with law. Constitution allows reasonable restrictions to be placed on fundamental rights. The policy decision contained in the writing dated August 28, 2008 is within the parameters of law. He has referred to Article 13 of the Constitution and submitted that, a notification can be construed to be a law within the meaning of Article 13. He has referred to Schedule VII List III Entry 21 and submitted that, it is open to the legislature to legislate on monopolies. By virtue of Article 162 of the Constitution, the Executive has the power to issue a notification on a subject which the legislature is competent to legislate. Since a legislature is competent to legislate on the issue of monopolies, the Executive, by virtue of Article 162 can lay down the law with regard thereto where the legislature is silent. In the present case, the legislature is silent on the issue of award of contract on nomination basis to the respondent no. 5. Therefore, there is no infirmity in the writing dated August 28, 2008. The same is to be considered as a policy decision and a law within the meaning of Article 13 by virtue of Article 162 read with Schedule VII List III Entry 21. He has relied upon 1998 Volume 1 Supreme Court Cases page 226 (Vineet Narain & Ors. v. Union of India & Anr.) in support of his contention.

Relying upon 1991 Volume 1 Supreme Court Cases page 91 (G.B. Mahajan & Ors. v. Jalgaon Municipal Council & Ors.), 2004 Volume 4 Supreme Court Cases page 714 (State of U.P. & Anr. v. Johri Mal) and 2011 Volume 5 Supreme Court Cases page 341 (State of Uttar Pradesh & Ors. v. Rakesh Kumar Keshari & Anr.), learned Senior Advocate for the respondent nos. 2 and 4 has submitted that, where there is a policy in place, the Courts must be slow in interfering therewith unless, the policy is substantiated to be against Part III of the Constitution of India or is perverse, irrational or illegal. In the facts of the present case, according to him, the policy decision dated August 28, 2008 cannot be construed to be against Part III of the Constitution or irrational or perverse.

Learned Senior Advocate for the respondent nos. 2 and 4 has submitted that, the issue as to whether the respondent no. 2 is required to go for open tender in the matter of award of work of handling and processing slag and recovery/processing of metallic scrap from slag received the consideration of the High Court of Chhattisgarh, Bilaspur in WPC No. 639 of 2013 (International Commerce Ltd. v. Govt. of India & Ors.). The Chhattisgarh High Court did not grant any relief to the petitioner therein.

Adverting to the facts of the present case, learned Senior Advocate appearing for the respondent nos. 2 and 4 has submitted that, the respondent nos. 2 and 4 implemented the policy decision dated August 28, 2008 in letter and spirit. It had acted on the advice of the Central Government. The Central Government is the decision making authority. As an instrumentality of the State under Article 12 of the Constitution, the respondent no. 2 is obliged to implement the decisions of the Central Government. It has done so. Therefore, the actions of the respondent no. 2 in undertaking a process for awarding contract on nomination basis to the respondent no. 5 and doing so, cannot be faulted.

Learned Senior Advocate appearing for the respondent no. 5 has adopted the submissions advanced on behalf of the respondent nos. 2 and 4. In addition thereto, learned Senior Advocate for the respondent no. 5 has submitted that, the writ petition is no longer maintainable in view of the subsequent events. He has referred to the prayers made in the plaint. He has submitted that, the prayers of the plaint relates to incidents of award of contract by the respondent no. 2 in favour of the respondent no. 5 in the year 2013. The respondent no. 2 had awarded the contract in favour of the respondent no. 5. Such contracts were time specific. The time period of such contracts are approaching completion. Therefore, according to him, the cause of action of the writ petition does not survive. The subject matter of the writ petition does not survive. He has referred to the supplementary affidavits filed on behalf of the respondent no. 5.

In response to the query raised by the Court, learned Senior Advocate appearing for the respondent no. 5 has referred to a chart showing that, a small percentage of the contract received by the respondent no. 5 from the respondent no. 2 is given to outsiders. Essentially, the respondent no. 5 requires machines to be hired from outsiders as and when required. Such contracts to outsiders are for such purpose. Therefore, according to him, it cannot be said that, the respondent no. 5 outsourced the contracts of the respondent no. 2 to outsiders. He has relied upon an unreported decision of the Punjab and Haryana High Court dated December 20, 2016 rendered in C.W.P. No. 21994 of 2016 (Manufacturers of Petroleum Specialties Association & Ors. v. Uttar Haryana Bijli Vitran Nigam Ltd. & Anr.) and submitted that, a similar challenge was not entertained by the Punjab and Haryana High Court. According to him, the writ petition should be dismissed.

Learned Advocate for the respondent nos. 1 and 3 has submitted that, the Central Government had taken a policy decision of awarding contract on nomination basis to the respondent no. 5. Such a policy decision ought not be interfered with by the Court in the facts of the present case. He has referred to the affidavit in opposition filed on behalf of the respondent nos. 1 and 3. On a query from the Court as to what was the policy of the Central Government, he has submitted that, he requires time to inform the Court of the same.

In reply, learned Senior Advocate appearing for the petitioner has submitted that, a policy is something which is of universal application. A decision to award contract on nomination basis by the respondent no. 2 in favour of the respondent no. 5 cannot be termed as a policy decision. As to the manner of policy, he has referred to Wanton's Law Lexicon, 16th Edition. According to him, Caterpillar India (P) Ltd. (supra) has laid down the policy. He has referred to paragraphs 9 and 10 of the Caterpillar India (P) Ltd. (supra). He has submitted that, Caterpillar India (P) Ltd. (supra) related to price preference. While undertaking an exercise whether price preference can be granted or not, the authorities cannot decide that contracts can be awarded on nomination basis. The authorities cannot render the parties to a course of position than what they would have been initially by virtue of the interpretation of Caterpillar India (P) Ltd. (supra). On the maintainability of the writ petition, he has submitted that, the prayers in the writ petition are such that, the decision of the respondent no. 2 in awarding contracts to the respondent no. 5 on nomination basis is under challenge. It is irrespective of any particular contract. The primary decision to award contract on nomination basis is under challenge. Therefore according to him, it cannot be said that the writ petition is not maintainable. He has distinguished the authorities cited on behalf of the respondents.

The following issues have arisen for consideration in the present writ petition.

i) Is the writ petition maintainable?

ii) Is the decision of respondent no. 2 to award contract on nomination basis to the respondent no. 5 bad in law?

iii) To what relief or reliefs are the parties entitled to? The petitioners have assailed the decision of the respondent no. 2 to award contract to the respondent no. 5 on nomination basis. Instances where, the respondent no. 2 had given such contract on nomination basis appears from the writ petition. In fact, the writ petitioners have assailed such instances also. However, since the decision to award contract to the respondent no. 5 on nomination basis is under challenge, such a decision, is justiciable. It is a decision taken by the respondent no. 2 which is an instrumentality within the meaning of Article 12 of the Constitution of India. Maintainability of the writ petition against the respondent no. 2 or 5 is not under challenge. The contention of the respondent no. 5 has been that, the events subsequent to the filing of the writ petition, render the writ petition not maintainable in view of the prayers made in the writ petition. With respect, the prayers in the writ petition include a prayer assailing the decision to award contract on nomination basis to the respondent no. 4. As noted above, such a decision is justiciable. It cannot be said that, the subsequent events have rendered the writ petition as not maintainable. The core issue has whether award of contract on nomination basis is violative of Article 14 of the Constitution or not requires discussion. The respondent no. 2 has not revisited its decision to grant contract to the respondent no. 5 on nomination basis. Rather in the course of arguments of the present writ petition, the respondent no. 2 and respondent no. 5 have contended that, such a procedure is permissible in law and that, such procedure does not infringe any provisions of law. Such a contention requires adjudication. Therefore, the writ petition cannot be said to be not maintainable. The first issue is answered in the affirmative and in favour of the petitioners.

Caterpillar India (P) Ltd. (supra) has considered whether purchase preference can be given to public sector enterprises or not. It was contended therein that, imposing a condition like purchase preference leads to a monopoly been created. Such a policy is without the sanctity of law. Upon considering the rival contentions, it has held as follows:-

"10. We feel that these are the aspects which need to be considered by the Ministries concerned. We,therefore, direct that industry-wise assessment be done and if there is already cost effectiveness in any PSEs there may not be any need for the preference being given. The examination should be on the line as to whether any preference is called for and what would be the margin of preference which would ensure level playing field. It should also be fixed specifically and while fixing the minimum amount it should be ensured that breaking of the quantity should be rational, so that there is no likelihood to introduce an element of uncertainty. If the object was to invite foreign direct investment, the impact of the preference on such investment has to be considered. It shall also be considered as to whether some amount of discretion as was given earlier has to be re-introduced. There cannot be certainly any rigid inflexible policy. Because of the substitution of the word "may" by "will" there is essentially reversal of the policy. Therefore, the applications are disposed of with the following directions:

(1) the exercise, as noted above, shall be undertaken by the Ministry concerned of the Central Government within a period of 4 months from today;

(2) The interim arrangements, operative presently shall continue till a fresh reconsideration is made by the departments concerned of the Government of India. (3) The interim orders shall not be restricted to the petitioners, appellant and the respondents. It shall only be binding on the parties who are L-1 and L-2 in the transaction concerned. While fixing the norms, the capacity of delivery of PSEs concerned and the competitors has also to be taken note of."

In the present case, the action of a public sector undertaking in granting contract to another public sector undertaking on nomination basis is under challenge. Central Vigilance Commission had considered the issue of award of back to back contracts by public sector undertakings and issued various guidelines with regard thereto by the Office Memorandum dated October 20, 2003. It had expressed the view that, the practice of award of works to public sector undertaking on nomination basis by the Government of India and the public sector undertakings need to be reviewed forthwith. Such a view is expressed in Paragraph 3 of the Office Memorandum which is as follows:-

"3. Commission is of the view that the practice of award of works to PSUs on nomination basis by Govt. of India/ PSUS needs to be reviewed forthwith."

The next circular of the Central Vigilance Commission that has been brought to the attention of the Court is Circular No. 15/5/06 dated May 9, 2006. It has dealt with transparency in works/purchase/consultancy contracts awarded on nomination basis. It has referred to its earlier Office Memorandum dated October 20, 2003. It has expressed a view that, there is a need to bring greater transparency and accountability in award of contracts on nomination basis. It has expressed the following view :-

"2. In the circumstances, if sometimes award of contract on nomination basis by the PSUs become inevitable, the Commission strongly feels that the following points should be strictly observed.

(i) All works awarded on nomination basis should be brought to the notice of the Board of the respective PSUs for scrutiny and vetting post facto.

(ii) The reports relating to such awards will be submitted to the Board every quarter.

(iii) The audit committee may be required to check at least 10% of such cases.

3. This may be noted for strict compliance."

Caterpillar India (P) Ltd. (supra) was rendered on May 18, 2007. Subsequent thereto, CVC has issued Office Order No. 23/7/07. It has noted an order of the Supreme Court of India in Nagar Nigam, Meerut (supra). CVC has by such Office Order required the Chief Vigilance Officers to formally apprise their respective Boards/Managements about the observations made by the Supreme Court in Nagar Nigam, Meerut (supra).

Nagar Nigam, Meerut (supra) has held in paragraph 16 as follows:-

"16. 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". (See Ram and Shyam Company vs. State of Haryana and Others)."

By a Circular No. 31/10/09 dated November 5, 2009, observed that, purchase preference policy should stand terminated with effect from March 31, 2008. It goes on to say that, the concerned Ministry/Department may independently evolve/review preferential policies for the sectors of their concern as per their requirement.

By the Circular No. 18/12/12 dated December 11, 2012 CVC has dealt with few complaints received by it regarding adoption of non-transparent methods in tendering and award of contract. It has expressed the following view:-

"2. In view of the complaints being received regarding award of contracts on 'nomination basis' without adequate justification, the Commission has decided to reiterate their earlier instruction for strict implementation. The Commission has also observed that there have been instances where government organisations/PSUs obtained contract from other government organisations/PSUs and further award the same to private entities 'on back to back tie up' basis without competitive tendering mechanism and without any significant value addition by the procuring government organisation/PSU. This practice subverts the Commission's emphasis on integrity, transparency, fairness and equity in decision making. It is therefore, necessary to curb this practice. Further, the Commission directs that details of all tenders awarded on nomination basis shall be posted on website in public domain as per Commission's office order of 5th July, 2007 along with brief reasons for doing so."

CVC therefore, is of the view that, award of contracts must be made on a transparent basis. Tender is a process which ensures the transparency in award of the contract. If such a tender process is to be given a go by then, the concerned Ministry must take a decision with regard thereto.

By a writing dated January 29, 2008, the Director (Operations) of the respondent no. 6 wrote to the Joint Secretary, Ministry of Steel, requiring guidelines of the Ministry of Steel as to whether to continue with the practice of awarding scrap processing/slag handling to the respondent no. 5 and H.S.C.L. on nomination basis or to go for a open tender in terms of the guidelines of CVC.

Government of India had a purchase preference policy for products and services of Central Public Sector Enterprises. It was dated October 25, 2007. Subsequent to the Caterpillar India (P) Ltd. (supra), it was decided that such purchase preference policy will be terminated with effect from March 31, 2008. It was decided that, the concerned Ministry/Department may independently evolve/review preferential policies for the sectors of their concern as per their requirement. The Department of public enterprises by its Office Memorandum dated November 21, 2007 advised the Ministry of Steel to set up a committee for consideration of preferential purchase policy in respect of the respondent no. 5. The Ministry of Steel set up a committee on purchase preference policy for the respondent no. 5 by its order dated March 25, 2008. Such committee submitted a report dated May 14, 2008. In Chapter IX of such report, the committee had recommended award of metal scrap/slag processing/recovery work to the respondent no. 5 on nomination basis due to the technical, economic, administrative and legal reasons stated therein. Paragraph 9.1 of Chapter IX specifies such reasons.

Ministry of Steel, Government of India issued an order dated August 28, 2008 dealing with preferential purchase policy for products and services of the respondent no. 5. The relevant portion of the preferential purchase policy in respect of the respondent no. 5 is as follows:-

"2. FSNL, a PSU under Ministry of Steel is engaged in the specialized activities of Steel scrap from slag in the steel plants. A committee under the Chairmanship of Director (Finance), Ministry of Steel with representatives of FSNL, SAIL & RINL was set up to examine the matter and give suggestions. The Committee examined the matter in detail and on account of technical economic administrative and tagged reasons, as detailed by the Committee in its report, recommended that the steel plants should award metal scrap/slag processing/recovery work to FSNL on nomination basis.

3. The matter has been under consideration of the Government. It has been decided with the approval of the Competent Authority that FSNL, a PSU under Ministry of Steel will continue to be awarded the work of metal scrap recovery and other allied work like slag processing etc. on nomination basis by other PSUs under Ministry of Steel. In case there is a difference of opinion on the price between FSNL and the concerned PSU, the matter will be transferred to the Ministry of Steel for taking a decision in the matter. Further FSNL will carry out the work departmentally. The respective Board of Directors of PSU which allot the work to FSNL will also scrutinise/vet the contract on its post facto basis."

The matter of preferential treatment to the respondent no. 5 did not rest with the order dated August 28, 2008. Such a decision received the consideration of the Steel Minister. By a writing dated February 11, 2010 the Steel Minister stated that, upon perusal of the file, he was not entirely convinced that the work can be given by one public sector unit to another public sector unit at the behest of the Ministry on nomination basis, although he opined that, there was some merit in the contention by the officers of the Ministry. Therefore, the Steel Minister required the matter to be referred to CVC for their comments as to whether the respondent no. 2 can continue to award work to the respondent no. 5 on nomination basis.

By a writing dated March 16, 2010, the Chief Vigilance Officer of the respondent no. 2 wrote to CVC stating that, respondent no. 5 does not have requisite resources of performing the contract on its own. The Chief Vigilance Officer had recommended open tender in order to ensure competitiveness of the bids. By an Office Memorandum dated April 23, 2010, CVC clarified that, the Office Memorandum of November 2007 speaks only of public sector price preference and that, awarding contracts on nomination is essentially different from price preference. Making use of such a circular to award work to the respondent no. 5 on nomination basis would not be correct. If a special dispensation for awarding works to the respondent no. 5 is justified then it has to get the approval of the Government of India.

The last of the writing brought to the notice of the Court is the writing dated April 23, 2010. As noted above, by such writing, CVC has noticed the difference between a price preference and award of contract on nomination basis. It has stipulated that, contracts can be awarded on nomination basis only if the special dispensation for the same is justified by the Ministry and approved by the Government of India. Therefore, as on April 23, 2010, there was no justification by the Ministry concerned for award of contract to the respondent no. 5 on nomination basis far less an approval of the Government of India to do the same. In such perspective, the stand taken by the respondents that, the writing dated August 28, 2008 is a policy decision, is without basis. CVC did not consider the writing dated August 28, 2008 to be a policy decision. As on April 23, 2010, there was no policy decision in the manner as claimed by the respondents for grant of contract on nomination basis by the respondent no. 2 in favour of the respondent no. 5. The respondent no. 2 itself did not consider the writing dated August 28, 2008 to be a policy decision as its subsequent conduct would establish.

A policy is understood to be a general principle by which a government is guided in the management of public affairs. In the present case, the respondents particularly the respondent no. 1, that is the Union of India, has claimed that, there is a policy decision dated August 28, 2008 governing the field of grant of contracts on nomination basis by the respondent no. 2 in favour of the respondent no. 5. As noted above, the Minister for Steel did not accept the writing dated August 28, 2008 to be a policy decision. Rather, he had opined that, the contract should be awarded on a transparent basis in his writing dated December 11, 2010. The issue as to whether, there exists a policy decision for grant of contract on nomination basis came up for consideration in International Commerce Limited and Anr. (supra) before the Chhattisgarh High Court. In International Commerce Limited and Anr. (supra) the Chhattisgarh High Court had noted that, the respondent no. 2 had taken a decision on July 13, 2012 to extend an invitation for expression of interest from reputed Indian and overseas agencies for handling and processing of slag and recovery/processing of metallic scrap from slag by unique, modern and latest technology. It has held that, such an invitation by the respondent no.2 itself was an indication that, the respondent no. 2 has decided to go for open bidding and therefore, nomination is not a method being followed by the units of the respondent no. 2 with regard to handling of slag and its processing. International Commerce Limited and Anr. (supra) was rendered on July 11, 2018. Union of India, as well as the respondent no. 2 were represented in such proceedings. In such proceedings, apparently, the writing dated August 28, 2008 was not considered to be a policy decision by any of the parties appearing therein. On the contrary, the decision of the respondent no. 2 in awarding contracts through open tender was noted. The respondent no. 2 could not have taken a decision in awarding contracts through open tender if there was a policy decision to the contrary. None of the stakeholders had considered the writing dated August 28, 2008 to be a policy decision.

In view of the discussions above, the decision dated August 28, 2008 cannot be termed to be a policy decision. The same was not treated to be a policy decision by the respondent no. 2. The respondent no. 2 had proceeded to invite the public at large to express interest in the matter of award of contract of the nature which were granted to the respondent no. 5 on nomination basis. Such conduct of the respondent no. 2 and its decision dated July 13, 2012 was noted in International Commerce Limited and Anr. (supra). Having taken a stand before the Chhattisgarh High Court, the respondent no. 2 cannot be allowed to take a contrary stand here. The stand of the respondent no. 2 here that, there exists a policy dated August 28, 2008 permitting it to grant contracts on nomination basis to the respondent no. 5 is contrary to that taken in International Commerce Limited and Anr. (supra).

In Manufacturers of Petroleum Specialties Association & Ors. (supra), the issue was whether, a tender can be floated for inviting offers for procurement of materials directly from the public sector units was arbitrary or not. The Punjab and Haryana High Court therein, has held that, the scope of interference by a Court in tender matters was limited. It did not interfere with a tender process limiting the tender to public sector units. In the present case, the respondent no. 2 is not undertaking any tender process. It is awarding contracts on nomination basis. The petitioners require the respondent no. 2 to award contract through the tender process. Therefore, the ratio of Manufacturers of Petroleum Specialties Association & Ors. (supra) is not attracted to the facts of the present case. Vineet Narain & Ors. (supra) has held that, the executive is entitled to fill the gap in the legislation. Where the executive fails, the judiciary must take and provide a solution till the legislature acts and covers the field. G.B. Mahajan & Ors. (supra) has held that, policy decision of the government or its instrumentalities are not open to judicial review so long as the method is within the Constitution and legal limits. It has noted that, principles of judicial review apply to exercise of contractual powers by a government body. However, there are limitations on the scope of the inquiry. There must be shown a public law element to the contractual decision before judicial review is invoked.

Johri Mal (supra) has held that, the power of judicial review is not intended to assume a supervisory role or don the robes of the omnipresent. It has held in paragraph 28 as follows :-

"28. The Scope and extent of power of the judicial review of the High Court contained in Article 226 of the Constitution of India would vary from case to case, the nature of the order, the relevant statute as also the other relevant factors including the nature of power exercised by the public authorities, namely, whether the power is statutory, quasi-judicial or administrative. The power of judicial review is not intended to assume a supervisory role or don the robes of the omnipresent. The power is not intended either to review governance under the rule of law nor do the courts step into the areas exclusively reserved by the suprema lex to the other organs of the State. Decisions and actions which do not have adjudicative disposition may not strictly fall for consideration before a judicial review court. The limited scope of judicial review, succinctly put, is :

(i) Courts, while exercising the power of judicial review, do not sit in appeal over the decisions of administrative bodies;

(ii) A petition for a judicial review would lie only on certain well-defined grounds.

(iii) An order passed by an administrative authority exercising discretion vested in it, cannot be interfered in judicial review unless it is shown that exercise of discretion itself is perverse or illegal.

(iv) A mere wrong decision without anything more is not enough to attract the power of judicial review; the supervisory jurisdiction conferred on a Court is limited to seeing that the Tribunal functions within the limits of its authority and that its decisions do not occasion miscarriage of justice.

(v) The Courts cannot be called upon to undertake the Government duties and functions. The Court shall not ordinarily interfere with a policy decision of the State. Social and economic belief of a Judge should not be invoked as a substitute for the

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judgment of the legislative bodies. (See Ira Munn Vs. State of Illinois)." Johri Mal (supra) was followed in Rakesh Kumar Keshari & Anr. (supra). It has held in paragraph 29 as follows:- "29. The Court in Johri Mal case also held that the decision and actions which do not have adjudicative disposition would not strictly fall for consideration before a judicial review court. According to this Court the limited scope of judicial review is: (i) Courts, while exercising the power of judicial review, do not sit in an appeal over the decisions of administrative bodies; (ii) A petition for a judicial review would lie only on certain well-defined grounds; (iii) An order passed by an administrative authority exercising discretion vested in it, cannot be interfered in judicial review unless it is shown that exercise of discretion itself was perverse or illegal; (iv) A mere wrong decision without anything more is not enough to attract the power of judicial review; (v) The supervisory jurisdiction conferred on a court is limited to seeing that the Tribunal functions within the limits of its authority and that its decision do not occasion miscarriage of justice: and (vi) The Court shall not ordinarily interfere with a policy decision of the State." The respondent no. 2 is a legal entity. As a legal entity it is entitled to enter into contracts. It is entitled to exercise discretion while entering into contracts. The respondent no. 2 is an instrumentality or an agency of the State within the meaning of Article 12 of the Constitution of India. As an instrumentality or an agency of the State, the exercise of its powers or discretion is subjected to the same limitations and parameters as are available to a Government while doing so. In exercising its discretion the respondent no. 2 is entitled to act arbitrarily, unreasonably, capriciously or in colourable exercise of power. The actions including award of contracts must conform to and pass the tests of Article 14. It is required to act fairly and treat equals equally. Its actions must be based upon rational and relevant principles, non- discriminatory in nature and is not tainted with extraneous considerations. Article 14of the Constitution guarantees, inter alia, equality of opportunity in matters of public contracts. Contracts granted by the respondent no. 2 are public contracts. It is trite law that, every decision to confer any largesse, contracts or benefits by the State or its instrumentalities or agencies must be based upon a sound, transparent and perceptible policy. Such policy must be in public domain. The respondent no. 2 therefore cannot grant contracts on whims or caprice. Nagar Nigam, Meerut (supra) requires contracts by State and its instrumentalities to be granted by public tender so as to provide fair and equitable treatment to all tenderers. Award of tender through public tender is the norm. It is not the only method. Any deviation from such norm must be based upon sound and discernable policy available in public domain. The decision of the respondent no. 2 to award contract on nomination basis to the respondent no. 5 is not founded upon any policy of the Government. There does not exist any special circumstance warranting grant of contract on nomination basis. The decision of the respondent no. 2 to grant contract to the respondent no. 5 on nomination basis is therefore arbitrary and is violative of Article 14 of the Constitution of India. Any administrative decision which violates the provisions of the Constitution, is amenable to judicial review and can be set aside if found to be violative. The second issue is answered in the affirmative and in favour of the petitioner. The decision of the respondent no. 2 to award contract to the respondent no. 5 on nomination basis is quashed. It will award contracts through public tender. W.P. No. 33074(W) of 2013 is disposed of accordingly. The third issue is answered accordingly. No order as to costs. Urgent certified website copies of this judgment and order, if applied for, be made available to the parties upon compliance of the requisite formalities. Later:- Prayers for stay on behalf of the respondent nos. 2 and 5 are considered and refused.
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