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PVC Pipe Manufacturers Welfare Association of Bihar v/s State of Bihar

    CWJC 14514 of 2007

    Decided On, 04 February 2008

    At, High Court of Bihar

    By, THE HONOURABLE MR. JUSTICE NAVANITI PD. SINGH

    For the Appearing Parties: Harendra Pd. Singh, P.K. Sahi, S.D. Sanjay, Suraj Samdarshi, Advocates.



Judgment Text

(1.) THE UPVC Pipe Manufacturers of this State as well as their Welfare Association are the petitioners. The State and its Public Health Engineering Department (PHED) and others are the respondents. The dispute relates to the right and the fight for survival of the small scale UPVC Pipe Manufacturers situated within the State. The ostensible challenge is based on the right of the said Industrial unit to get a preference in procurement of their pipes by the State government to sustain the local industries as per Governmental decisions made in their favour, inter alia, in April/july, 2007 and actions taken pursuant thereto which were apparently given a virtual go-bye by the department concerned (PHED) within three months resulting in abrupt overturning of the purchase policy and cancellation of a tenders which would have inured to the benefit of the petitioners, without disclosure of proper and justifiable reasons, making the decision and the actions thereunder of the department actionably arbitrary.

(2.) IN view of the urgency of the State in the matter as well as for the petitioners, the matter was taken up for final hearing and disposal at this stage itself with the consent of parties. Parties have exchanged pleadings and were heard in extenso.

(3.) PETITIONERS No. 2 to 6 are registered small scale industrial units all situated within the State of Bihar and petitioner No. 1 is registered Welfare Association of such industries. Petitioners are manufacturers of pvc pipes including UPVC pipes whose main large scale consumer appears to be the State government. Apart from generating employment, they are revenue paying units to the state by virtue of payment of various taxes and duties.

(4.) APPARENTLY, State Government realizing the importance, need and necessity of industrial development in the State of Bihar as a route to develop the State, formulated policies for encouraging local industries. Prospering industry in the State not only offers local employment generation but also gives rise to local secondary trade and the two together help augment State revenue resources. With the said object, the State Government announced the Industrial Policy resolution 2006 not only for attracting industrial investment in the State but also creating industrial friendly environment. Under the said policy, apart from various other incentives, small scale manufacturers were assured of State help in marketing their products which was one of the biggest problems facing SSI units of Bihar.

(5.) IT is now clear that realizing the difficulties faced by local industrial units in marketing their products as against the competition offered by national level industries, the state, noticing that adjoining States had made rules obliging those States to purchase their requirement from their own industrial unit situated in their State, thus, denying effective market to the industries of Bihar, it was necessary to make such provisions which permitted and obliged the State Government Departments to make purchases or to acquire goods from local manufacturers subject to price and quality consider ation that local industries could survive and grow. It was also noticed that under the bihar Finance Rules and the Store, Purchase and Preference Rules of State what was earlier provided was only a 7% price preference to local industries which was found not sufficient. It was thought necessary by the State government to amend the Bihar Finance rules and make provisions so that the State departments would be obliged to purchase certain notified goods at or below the DGS and D rates from local manufacturers only. The procurement from State level units had to be made according to their production capacity and would be distributed amongst local industrial units as such. With that intention in mind, the State Government passed a resolution being Resolution No. 2397 through the Department of Finance

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, government of Bihar dated 3-4-2007 with the approval of the State Cabinet and under orders of the Governor. It was issued and promulgated, true copy whereof has been annexed as Annexure-1. By this resolution, noticing the aforesaid, the Bihar Finance Rules 2005 were amended and Rule 131 and some of its sub-rules were substituted effectuating the policy aforesaid.

(6.) THE effect of the said policy and the amendments to the Rules aforesaid was that now the Government Departments who were otherwise required to issue open tenders for procuring goods required by them, thus, permitting virtually national level competition, were now authorized and obliged to issue, in a sense limited tender for specified goods for purchase from only local industrial units at or less than DGS and D rates subject to third party quality inspection.

(7.) THE Rules, thus, having been amended, the State then appears to have taken up the exercise of identifying the goods considering the incentive which had to be given to particular industries in this matter situated within the State. This led to issuance of another resolution being Resolution no. 5053 dated 16-7-2007 (Annexure-2)through the Finance Department, Government of bihar in pursuance to the amendment as aforesaid in respect of ISI mark upvc pipes /ribbed screen pipes as well as isi mark hand pumps. A reference to the said notification (Annexure-2) would show that the State took into account the production capacity available with local units and noted their own requirement in the said notification. The effect of this notification, which was circulated to all Departments, was that if, on and from the date of the notification, any such PVC pipes or hand pumps were required to be purchased by the State Government for any of its Schemes then these two products (pipes and hand pumps) could only be purchased to the extent indicated in the notification from local industrial units subject of course to the price condition and the quality condition. This resolution in respect of the quantities mentioned therein was to be effective throughout the financial year 2007-2008. This was circulated to all Departments of the Government including PHED, the respondents.

(8.) IN furtherance to the aforesaid exercise done by the State Government, the phed. through its Engineer-in-Chief-cum-Special Secretary, issued a tender notice in the last week of July 2007 apart from hand pumps for various quantity of UPVC pipes and UPVC ribbed screen filters which were to be supplied within a total period of four months. Most of the supplies had to be made within a period of two months. Bill of Quantity (BOQ)was to be obtained by 30th of July and last day for filing tenders was 31st of july 2007. Tender papers and BOQ were to be sold by paying Rs. 10,000/- each and the tenders were to be opened on 31st of july 2007. Clause 20 of the BOQ (Part of annexure-3, the tender notice) clearly stipulated that the tenders would be disposed of in accordance with the revised Bihar PWD code and the Bihar Finance Rules 2005 which, as stated above, had been amended by then. The quantities, as mentioned in the tender, are corresponding to the quantities, as mentioned in the notification, specifying goods for local purchase, as contained in annexure-2. Thus, it can safely be held and it was rightly accepted so by the PHED that the tender, as issued for local purchase of those goods, was in furtherance to the policies and notifications as appended in annexures-1 and 2. Petitioners being local industries for whose development and benefit, these steps were taken purchased the tender papers and duly filed their tenders.

(9.) THE petitioners state that once the tenders were filed on opening thereof, the rate quoted by one of its members was found to be the lowest. A negotiation was called for thereafter in the first week of August 2007 by the Secretary of the PHED in presence of the Engineer in Chief cum Special secretary to the Department wherein all the petitioners agreed to supply at the rate quoted by the lowest tenderer. The Department was anxious to complete the purchase at the earliest and, as such, requested the petitioners to be ready to supply 50% of the tendered quantity within a month from issuance of supply order and to complete the supplies at the earliest not exceeding the period of four months/two months, as indicated in the tender.

(10.) PETITIONERS agreed to all this there and then. In order to be able to supply, pursuant to the anticipated supply orders which was assured to be issued without any further delay, they geared up their production and stocked the materials in order to comply with the urgent needs of the Government. These facts are not disputed in the counter affidavit filed on behalf of respondents. What is only disputed on these factual issues is that the State did not order the petitioners to produce and keep in readiness the goods for supply but rest of the facts with regard to negotiation and request for early supplies once supply orders are issued are clearly admitted.

(11.) THE State Government accepts these positions and object behind it even today but as would appear, the PHED has effecttively bypassed the said objective and put the whole exercise to a naught which has brought the petitioners before this Court.

(12.) IT seems the urgency suddenly vanished and for two months the petitioners waited for supply order as virtually nothing more was required to be done by the Department but to issue the supply orders as rates, quantities etc. had all been finalized immediately in the first week of August 2007 itself. In October 2007, the petitioners having waited for almost two months represented to the Department (Annexure-4) soliciting Governmental action with regard to the issuance of supply orders but there was no response.

(13.) PETITIONERS then made due application in october 2007 itself under the provisions of the right to Information Act seeking the details of the proceedings in relation to the tender in question so that they could know as to what had happened in the matter. On one side, the Department was showing urgency in the purchase and on the other side, after full negotiation, no orders were being issued for purchase/supply. Even though the receipt of such requisition in october 2007 itself was not denied by the state, information was not supplied. Even while filing the counter affidavits which were filed in January 2008 all that the Department says in response to the said averments is that the requisite information is being served to the petitioners but nothing was either appended to the counter affidavits nor served on the petitioners at any point of time. All informations with regard to the proceedings in relation to the said tender remained undisclosed in spite of statutory request. It may be noted that on the very first hearing of this matter, this was an issue raised by the petitioners and in that view of the matter this Court, by its order dated 20-12-2007, had advised the State to keep in readiness the records of the earlier tender and the subsequent tender when the matter is taken up subsequently.

(14.) THEN comes Annexure-6, the impugned letter of the Secretary of the PHED being letter No. 1600 dated 25-10-2007, It is also appended as Annexure-A to the counter affidavit of the respondents. By this letter, the Secretary of the Department Intimates to its regional engineers including chief Engineers that the Department had decided to get the Drinking Water Supply programme to be decentralized and taken up at regional levels on turn key basis.

(15.) EFFECTIVELY, this communication dated 25-10-2007 (Annexure-6) puts at naught the entire process of procurement of pipes and hand pumps from local manufacturers exclusively. What it effectively does is that instead of the Department purchasing the pipes and then getting it installed, it now decided to give and lump sum contract on turn key basis to contractors and those contractors are under no obligation to make purchases from the local manufacturers, thus, all the rights and incentives that were to inure to the local manufacturers pursuant to the Government policy decision and notifications issued thereunder followed by the tender were effectively Junked by the department. Against this decision to award the work on turn key basis, apart, from other grievance, one of the grievance that has rightly been made by the petitioners in this respect is that though in neighbouring states also, such steps of getting the work done on turn key basis has been taken, those States have ensured that those contractors make local purchases from local manufacturers, thus, protecting their industries which has been given a complete go bye in the present by the PHED.

(16.) ALL that Annexure-6 being the letter dated 25-10-2007 discloses is that for certain reasons, there has been difficulty in implementing the schemes by purchases and, as such, the tenders would be now on turn key basis and decentralized. But while doing so, it is provided also that final orders would be issued only after orders from competent authority (centralized) and even for implementation of any Government Scheme through turn key project, goods are required to be purchased by the contractors they should be credited/accounted to the turn key project for purchase at the rate to be notified. The rates were notified are as per annexure-7 to the writ petition and a reference thereto would show that those are the lowest rates as quoted by the petitioners in response to the earlier tender,

(17.) BY I. A. No. 6953 of 2007 subsequent developments have been brought on record being tender notice dated 3-12-2007 (Annexure-8) which was again with respect to purchases from State level manufacturers. Yet another supplementary affidavit was then filed by the petitioners bringing on record further developments on record, wherein during pendency of the writ petition first being fresh impugned tenders for contractors to do the work of laying hand pumps, using UPVC pipes, filters etc. at regional levels (Annexure-9 series) in the month of December, 2007 and then by the letter dated 10-1-2008 (Annexure-10), Engineer-in-Chief-cum-Special Secretary merely stated that the Government had decided not to procure materials against tender dated 31-7-2007 (Annexure-3 series) to which the petitioners had earlier responded. No reason was disclosed for rescinding the original tenders.

(18.) THE State in its counter affidavit has merely stated that the Department was competent to evolve its own policy and it did so by deciding to decentralize the tender process and in light of new policy decision taken by the Department, tenders were called for now on turn key basis. As to why there was a sudden shift in the policy and the reason thereof it was categorically stated that the department is not bound to disclose any reason even though their actions operated detrimentally to the expectations and the promises held out by the State to the petitioners earlier made It was further stated that the petitioners had no fundamental or legal right to insist that the respondent State should purchase material from the petitioners in any particular manner.

(19.) IN fairness to the learned Advocate general who appeared on behalf of the respondents-State and its Departments, the original files were produced to which I would advert later.

(20.) PETITIONERS effectively submit that what has been given by the right hand by the resolution of the State Government notification and the tender issued thereafter has been effectively taken away by the Department which is unjust and arbitrary. The department, it is submitted, being a part of the Government could not so formulate its policy so as to by pass or ignore the incentive that was sought to be given by the Government to the local industry. It is pointed out that the Department has not directly altered the Governmental policy but evolved a modality by which it evades the obligation to follow the policy and this is what makes the actions unjust and arbitrary. It is further submitted that there is no justifiable reason for such a dramatic change which gravely hurts the local industry. Lastly, it is submitted that like other States, this State should also make it obligatory on contractors to make purchase from local manufacturers which would then be consistent to the Governmental policy to protect the petitioners and allow the Department to get the work done on turn key basis.

(21.) IN course of hearing when this Court pointed out to the learned Advocate General appearing for the respondents that communication of change of policy by letter dated 25-10-2007 (Annexure-6) itself stated that there were some reasons for this sudden and drastic change in policy from purchase from local manufacturers to getting the work done by the Department on turn key basis and the tenders would be decentralized, then surely if not the petitioners who were vitally affected by the sudden change, the Court was required to be disclosed the reasons, learned Advocate General very fairly placed before the Court two sets of flies. The first which dealt with the first tender which was for purchase in which petitioners participated (Annexure-3) and the second leading to the change of policy and issuance of the fresh tenders on turn key basis (Annexure-9 series).

(22.) THE first file discloses the facts as stated by the petitioners with regard to their filing of tenders and opening thereof on 31-7-2007. Then it discloses some sort of negotiation followed by recommendation dated 3-8-2007 of the Purchase Committee so constituted recommending for purchase of pipes at the lowest rate from the petitioners. The recommendations were sent to the Minister incharge for his approval. On 4-8-2007, the minister Incharge endorsed the matter to the finance Department. Here, to the specific query of the Court that, was not the Minister Incharge competent to take a decision himself in the matter, the learned Advocate general conceded the same. On further query whether all such tenders were referred to the Finance Department in past, the reply was that it was normally not done and to the query whether any rule, regulation or practice envisaged such a reference, the answer again was in the negative. Virtually, no reason of any substance was disclosed as to why suddenly the Minister, instead of deciding the matter himself, referred the matter to the Finance Department.

(23.) EVEN though, as noted earlier, State had expressed urgency over the matter, the finance Department then started making queries from the PHED and the matter of finalization got delayed. Equally suddenly on 25-9-2007, the respondent-Secretary, phed notes that new policy was in the offering and the tender matter was left thus.

(24.) THE second file starts on 13-9-2007 on the verbal orders of the Engineer-in-Chief-cum-Special Secretary Shri Madan kumar to PHED which file really indicates the considerations, reasons for the change of policy.

(25.) IT is first noted that in recent past, there has been great difficulty in finalizing the tenders leading to delays. Centralized tender system is creating a lot of work load on the headquarters and the frequent dispute between outside industries and local industries have been raised before the High court. This has led to delay in implementation of the schemes. This is the first set of reasoning given which is the foundation for recommending change of policy.

(26.) IN my view, this is all mumbo-Jumbo and does not give the correct picture. Apparently consciously, no reference has been made by the officer to the fact of amendment to the Bihar Finance Rules and the notification issued thereafter reserving PVC pipes and hand pumps for local purchase which was done in April/june 2007 (Annexures-1 and 2) by the State Government. No reference was made to the fact that tenders were issued in July 2007 which could have been finalized by the Department itself in the very first week of August 2007 but for some undisclosed reasons, it lay with the Department having been referred to the finance Department for which the Department itself was to blame rather than ascribing the delay to some vague undisclosed cause, Reference to litigation in the High court was also wrongly made as the litigation was because ignoring the new policy of local purchase of commodities open to all, tenders were called which tenders were later recalled by the Department itself. Thus, apparently wrong basic factual inputs were introduced to convey wrong idea and suggest necessity for change in policy. The new solution was offered by way of tender for turn key project pointing out that for the financial year, 2006-2007 (which had actually already ended), tender process could not finalize for certain reasons as file was pending with the Finance Department (at the instance of PHED itself-not stated). It was then noted that the solution was to decentralize the tender process and as in case of big projects, turn key basis should be adopted even in these small projects without mentioning that the policy of purchase was envisaged by the Government to encourage the local manufacturers and to sustain them while getting the Government's scheme done. Then is the noting of the Secretary of the Department which notices the facts noted above and suggests that if work is done on turn key basis then the contractors could also have to purchase the materials at the scheduled rates as is done in most works contract (not mentioning that they were under no obligation to purchase goods from local manufacturers). In a meeting with the Chief Minister, it was decided that the work should now be done on turn key basis. The tenders to be floated by regional offices and the contractors would purchase all goods at scheduled rates. On these facts and considerations, the matter then travelled and apparently received the green flag to change the system of getting the work done. In the entire note sheet which virtually ends with the impugned letter dated 25-10-2007 (Annexure-6), there is absolutely no mention of the State Government's policy decision to aid local manufacturers and amendments made in the rules and the notifications issued pursuant thereto. There is no discussion nor any one's attention is drawn to these facts. The only thing that appears is that vague suggestions are made pointing to delay in implementation of Government's Rural Drinking Water schemes and vague (not to say correct) and a quick solution is offered by way of turn key project avoiding obligation to make local purchases as aforesaid.

(27.) IN my view, this Court though cannot dictate and/or sit in appeal over policy decisions taken by a Department of the Government but it can certainly look into the reasons therefore and whether it was based on relevant or irrelevant considerations as the effect of the policy is drastic and disastrous for a group of citizens.

(28.) IN order to appreciate this stand, one must see what the earlier policy was, what was wrong with that policy and what necessitated the change in policy or what was so advantageous in the new policy that the policy to encourage local industry could be sacrificed totally. In other words, whether the change in policy was not arbitrary both having no reason or rational and in its application as well. In other words, can policy decisions of the State be subject matter to judicial review or not and if it is permissible can principles of promissory estoppel, legitimate expectations, necessity for taking informed decisions and check for colorable exercise of discretionary powers be applied. Yet another would be the question of applicability of the principles of judicial review on Principles of Proportionality as noticed in the House of Lords decisions in the case of R, v. Secretary of State for the Home Department, ex parte Daly (2001) 3 The All England Law Reports 433,

(29.) FIRST coming to the question of availability of judicial review against Government policy, 1 may refer to a recent judgment of the Apex Court in the case of Ashoka Smokeless coal India (P) Ltd. and others v. Union of India and others since reported in (2007)2 Supreme Court Cases 640 wherein paragraph 162 reads as follows :

"the submission of the learned Additional solicitor General to the effect that the policy decision of a State cannot be subject matter of judicial review is stated to be rejected. "

(30.) IN the present case, this changed policy decision is not the policy decision of the State Government, for the State Government, policy is reflected by Annexures 1 and 2 whereby decision was taken to give incentive to local industrial manufacturers and provisions were made in respect thereof and as noted earlier in this judgment specifically keeping in which the specific requirement of PHED in the financial year, 2007-2008. The present decision which is challenged is that of the Public Health Engineering department being part of the Executive of the State Government. At the cost of repetition, this Court should not be misunderstood to be holding that justifiability of policy per se could be questioned in courts. If the policy or in its application, the policy operates arbitrarily then it is too late in the day to suggest that the same cannot be decided on the touchstone of Article 14 of the Constitution. Thus, it is open to the Court, if situation so demands, to look into the foundation of the policy and the effect it has, If it is found that a policy is founded on arbitrary or wrong assumptions or it is arbitrary in its application, the Courts would certainly be bound to interfere,

(31.) HERE, the policy which was framed by the Government as late as in April/june 2007 was to encourage and grant incentive to local manufacturing units vis-a-vis the government Schemes noticing specifically the problem of marketing their products, especially in view of rules framed, by neighbouring States which obliged purchase from their local manufacturers, excluding, in effect the Bihar manufacturers. This policy, which was vital for survival of local industries to which Government was alive, was not even referred to much less discussed or pointed out to appropriate authorities while suggesting change, The basic ground for suggesting change appears to be delay in implementing Government schemes by making local purchases by the Government, this delay has been wrongly attributed to the earlier system whereas, as noted above in this judgment, the delay was solely because of indecisiveness of the Department itself and had nothing to do with the incentive policies or the local manufacturers. Thus, this Court finds that the fundamental basis for recommending change of policy was in fact unfounded. This unfounded premise as a cause/necessity for change, in my view, only points to the arbitrariness of the foundation to the ultimate decision that was taken. There was no wrong nor any fault in the earlier policy pointed out even in the office notings.

(32.) HERE, I may also point out that one of the objects for enacting the Right to Information Act was that such office notings being recommendations of the bureaucracy in the Executive could be made public so that public could know and point out factual or other inaccuracies and if that is not permitted then the RTI Act serves no purpose whatsoever. It was put a check on the Executive making wrong recommendations on wrong footings. It makes the decision making process transparent. Though I do not hold conclusively but apparently it is this reason why the information was not supplied to the petitioners at the appropriate time, otherwise the petitioners would have been able to persuade the concerned authorities that the fault in delayed execution of government scheme was not with the earlier policy which required any change but within the bureaucracy itself who were delaying finalization of tenders and transferring their inability to finalize tender as a cause for change of policy departmentally.

(33.) THE Executive has managed to do indirectly what they could not do directly i. e. they have managed to avoid obligation of local purchase. They indirectly managed to evade obligation to purchase from local manufacturers what they could not do directly in view of the earlier policy of the Government. This renders the change arbitrary.

(34.) THE petitioners then assert that in the meeting of the Tender Committee, they were told to get in readiness the immediate supply of goods and they having produced those goods in readiness to help the State expeditiously executing its schemes, the state cannot be permitted to resile from the said tender on the basis of principles of promissory estoppel. In my view, there is some justifiability in this submission for the state has not controverted as to what transpired in the meeting of the Tender Committee as stated by petitioners. It has only taken a technical plea that no supply order having been issued, petitioners had no right. This, to my mind, is begging the question because principles of promissory estoppel applies at a pre-contractual stage because once supply orders were issued, the matter goes into the realm of contractual obligation. Here, clearly the position is that petitioners manufactured and stocked goods for immediately supply as was given to them to understand by the Tender Committee. Having done so and the Tender Committee having recommended acceptance of the tender and even the Minister Incharge of the Department not having dissented in any manner now to turn around and say that merely because supply orders were not ultimately issued no right accrues to the petitioners would not only be unreasonable but would be arbitrary. In a democratic society, Government is expected to act fairly and reasonable and in the interest of its subjects. It would have been a different matter where the Government invites application and for certain things like grant of licence but before the applications are disposed of, the government takes a decision not to grant any new licence. The policy not to grant a new licence being permissible, investment by prospective licence seekers would be no ground to bar the Government from change of its previous policy as has been held by the Apex Court in the case of Kuldeep Singh v. Government of NCT of Delhi (2006)5 Supreme Court Cases 702 : (AIR 2006 SC 2652). There, the Apex Court found that the petitioners applied for licences for liquor vend but before the applications could be disposed of, Government took a policy decision not to grant any new licence. Thus, the court held that no right had accrued or vested in the persons to bar the Government from changing its previous policy especially as the policy was to be considered having regard to Article 47 of the Constitution of india. The facts in the present case, as found above, are different and distinct.

(35.) I may also refer, in this regard to the concept of promissory estoppel as discussed in the case of Ashoka Smokeless Coal India (P) Ltd. (supra) as decided by the Apex Court, i may also refer to the case of State of Bihar and others v. Suprabhat Steel Limited and others since reported in (1999)1 Supreme court Cases 31 : (AIR 1999 SC 303) where the Apex Court, inter alia, held that once the State Government envisaged incentives in the Industrial Policy then all Departments had to work in the direction of implementing such policy and even though they were authorized by the Bihar Finance Act (prevalent Sales Tax Act in the State)to grant exemptions on "such conditions and restrictions as it may impose", it would not authorize the State Government to negate the incentives and the benefit which an industrial unit would otherwise be entitled to under the general industrial incentive policy resolution.

(36.) I may also refer to paragraph 183 of the judgment of the Apex Court in the case of Ashoka Smokeless Coal India (P) Ltd. (supra) :

"principle of natural justice will apply in cases where there is some right which is likely to be affected by an act of administration. Good administration, however, demands observance of doctrine of reasonableness in other situations also where the citizens may legitimately expect to be treated fairly. Doctrine of legitimate expectation has been developed in the context of principles of natural justice. "

(37.) NOW coming to the concept of informed decision for the purposes of judicial review, an informed decision is a decision which is taken on conscious consideration of all relevant facts. A decision which does not take into consideration relevant facts vitiates the decision or a decision based on wrong or irrelevant fact would also vitiate a decision. Government policy is a policy decision. If it is shown to be based on irrelevant considerations or non-existent considerations or wrong considerations then the policy decision itself would stand vitiated as being arbitrary. Here, in the present case, the office noting which formed the basis for changing the decision from procuring goods from local manufacturers to issuing turn key tenders was based on the premise that procuring goods from local manufacturers for implementing Governmental scheme was leading to inordinate delay in implementing the scheme. As noticed earlier, this factual foundation was unwarranted, wrong and incorrect. There was no delay on part of any one but the very Government officers who were to implement the scheme. Their own inability to decide and finalize expedltlously, the purchase, was leading to the delay and regretably that delay became the reason for changing the system thereby allowing the department to relieve itself of the obligation to support the local industries. The foundation having been found to be unfounded, it cannot be said that an informed decision had been taken for there is absolutely no consideration nor even a whisper or reference to the policy to give incentive to the local industry while implementing Governmental schemes which policy was neither dilatory in any manner nor shown to be so. Thus, it cannot be said that the Government department took an informed decision considering all aspects of the matter and that too considering the relevant matters.

(38.) SO far as the question of colorable exercise of discretionary power is concerned, that is a ground for judicial review but I do not think it is proper or desirable in the present case to finally decide this issue. Suffice to say that the Department managed to do indirectly what they could not do directly. They managed to evade the obligation to give incentives to local manufacturers by devising a new scheme for getting the work done and neglecting their (local industries) interest.

(39.) I may refer to the decision in the case of R. v. Secretary of State for the Home department, ex parte Daly (supra), There, the Secretary of State had issued a policy guideline governing searching of cells occupied by convicts and remand prisoners in absence of prisoner. While dealing with the case, it was held that apart from the traditional grounds of review which were available, there was the principle of proportionality. As held by the House of Lords :

"the starting point is that there is an overlap between the traditional grounds of review and the approach of proportionality. Most cases would be decided in the same way whichever approach is adopted. But the intensity of review is somewhat greater under the proportionality approach. Making due allowance for important structural differences between various convention rights, which I do not propose to discuss, a few generalizations are perhaps permissible. I would mention three concrete differences without suggesting that my statement is exhaustive. First, the doctrine of proportionality may require the reviewing Court to assess the balance which the decision maker has struck, not merely whether It is within the range of rational or reasonable decisions. Secondly, the proportionality test may go further than the traditional grounds of review in as much as it may require attention to be directed to the relative weight accorded to interests and considerations. "

(40.) THE third consideration, as noticed by the House of Lords is not relevant for the present purpose and, hence, not quoted. It deals with extraordinary outweighing necessity to ignore an interest.

(41.) HERE, it would be seen that one has to look into the proportionality of things that is the balancing of the interest of local industries and the desire to quickly implement the Governmental scheme. Applying this test, it would be seen that the interest of local industries has been given a complete go-bye on the boggy of quick implementation of Governmental scheme even though purchase from local industry was not in any manner impeding quick implementation of the scheme in fact. While taking Governmental policy decision, the conflicting interest have not at all been noticed much less balanced and this, in my view, leads to the irresistible conclusion that the change of policy as made by the Department, is not reasonable and is arbitrary. It is violative of article 14 of the Constitution of India.

(42.) IN my view, even if this change of policy departmentally was necessary, the interest of local industrial manufacturers which was to be protected and which policy of Government was subsisting could be subserved by introducing a single clause in the fresh impugned tenders making it obligatory on the contractors of the turn key projects to make purchases of the notified goods on the prices as already stipulated from the local manufacturers as has been done in other States to protect their industries which has also been specifically noticed in the reason given for amendment of rule 131 of the Bihar Finance Rules (Annexure-1). This would have ended the controversy, protected local Industry, and while implementing development scheme of the government, it would have encouraged industries leading to overall development of the State. This would have removed the vice of arbitrariness in the matter.

(43.) REGRETTABLY, what has been achieved departmentally is - let the scheme flourish-local industry perish, whereas by merely introducing an obligation on the contractors of turn key projects to make purchases from local manufacturers, both the objects i. e. Governmental policy to encourage local industries and the Departmental Policy to expedite the Scheme would have been subserved was not done.

(44.) THUS, in my view the irresistible conclusion is that the manner in which the Governmental policy has been changed by the department is arbitrary and violative of Article 14 of the constitution of India for the reasons as discussed above and, as such, the fresh tenders issued for implementing governmental scheme of turn key basis, as evidenced by Annexure-9 series, without obligation cast on the contractors to make purchases from local manufacturers cannot be permitted to be carried out. The tenders, whose finalization had been stayed by this court's interim order, are thus quashed. The writ application is allowed. Application allowed
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