Public properties held and handled in different ways by the State or the Government are in the realm of “public trust”. The State or the instrumentalities thereof have fetters on their power in dealing with such matters in furtherance of public interest and interest. They cannot behave like any private party.
The Supreme Court and the High Courts had to tackle the problems relating to this with caution and care. The watersheds with reference to contracts have been dissected. The first has been the reasonableness of the terms of invitation for tender. Consideration of the tenders at the threshold became the next stage. After the contract was executed, there would also be occasions for tackling the issues in the realm of contract.
Finally, termination or conclusion of contract could also give rise to issues relating to reasonableness, fair play and justice in terms of Article 14 of the Constitution.
It is a baffling field of ever-advancing frontiers of administrative law. Judicial review is a basic structure of our Constitution; and the State cannot be relieved of its duties and obligations while dealing with matters in the domain of largesse of the State (whether directly or through its instrumentalities). It is a matter of concern for all of us to understand and appreciate the nuances of law in the arena of business dealings of the Government or its entities/instrumentalities.
The principles of judicial review are to apply to the exercise contractual powers by governmental bodies/entities in order to prevent arbitrariness or favouritism. The principle laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. The Government is the guardian of the finances of the State. The right to refuse the lowest or any other tender is always available to the Government.
But, the principles laid down in Article 14 have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose, the exercise of that power will be struck down. Where a decision has been taken purely in public interest, the court ordinarily should exercise judicial restraint.
The allegation of breach of Article 14 cannot be adjudicated unless the full facts of the contractual dispute are ascertained and the contractual rights of the parties adjudicated.
Ordinarily, a superior court in exercise of its jurisdiction would not enforce the terms of a contract qua contract, but when an action of the State is arbitrary or discriminatory and, thus, violative of Article 14, a writ petition would be maintainable. Fixation of the value of the tender is entirely within the purview of the executive; and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. The doctrine of fairness and reasonableness cannot be invoked to amend, alter or vary the expressed terms of contract between the parties.
A blacklisting order involves civil consequences and tarnishes one’s reputation and must be passed with adherence to principles of natural justice and equality. It is incumbent on the Government’s part to state in its show-cause notice that the penalty of blacklisting is proposed to be taken against the noticee.
An order of blacklisting is a measure to discipline a contractor and must not be for an indefinite period; the period of debarment depends upon the nature of the offence committed by the erring contractor. In case of Government bodies, the decision to blacklist is subject to judicial review on the touchstone of fairness, relevance, natural justice, nondiscrimination, equality and proportionality.
The award of contracts through auction is considered to be one of the fair methods. However if there are any reservations or restrictions, they should not be arbitrary and must be justifiable on the basis of some policy or valid principles, which by themselves should be reasonable and not discriminatory.
Any act which excludes competition from any part of the trade or commerce by forming cartels should not be permitted. In Centre for Public Interest litigation Vs Union of India, the question before the Supreme Court was whether the policy of “first-come-first-served” followed by the Department of Telecommunications for grant of Unified Access Service licence was ultra vires Article 14.
The court held that a method of allocation by the policy of first-come-first-served was arbitrary and illegal and that while transferring or alienating the natural resources, the State is duty-bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process. The licences granted and the subsequent spectrum allotted to the licensees were declared illegal and quashed.
However, the Supreme Court, thereafter, held that there is no Constitutional mandate under Article 14 in favour of auction; and whenever the object or policy is other than revenue maximisation, the executive could adopt methods other than auction.
Hence, auction, despite being a more preferable method of alienation/allocation of natural resources, cannot be held to be a Constitutional requirement or limitation for alienation of all natural resources; and every method other than auction cannot be struck down as ultra vires the Constitutional method. The “Swiss challenge” method has been noticed in this regard.
The Supreme Court has further held in a case concerning allocation of coal blocks that it amounts to grant of largesse by the Central Government; and hence, such allocation must meet the twin constitutional tests: distribution of natural resources that vest in the State must subserve the common cause/good and allocation must not be violative of Article 14.
The entire allocation of coal blocks as per the recommendations of the Screening Committee in 36 meetings and allocations through the Government dispensation route were found to suffer from the vice of arbitrariness and legal flaws.
As there were neither objective criteria for evaluation of comparative merits nor fair and transparent procedure, resulting in unfair distribution of national wealth, the allocation of coal blocks was held to be illegal.
After holding the allocation to be illegal and arbitrary, the Supreme Court quashed all such allocations except two made to Mega Power Projects and allocations made to the Central Government’s Public Sector Undertakings not having any joint venture.
Despite the bid being higher than the reserve price fixed, the sale is still open to challenge on the ground that property has not fetched the proper price and that the sale can be set aside.
Public auction not only ensures fair price and maximum return but also militates against any allegation of favouritism on the Government’s part while according grant for disposing of public property. It ensures transparency and would be free from bias or discrimination and beyond reproach.
The golden thread running through the decision of the Supreme Court is to ensure that there is exercise of power in a just, fair and reasonable manner. The power has also to be always exercised in furtherance of public interest. Article 14, as it has been said in some of the judgments of the apex court, is the “brooding spirit” of “reasonableness” pervading the entire Constitution in so far as decisions and actions by the State are concerned.
This is an ever-expanding field of law, which touches all wings of the society. Tender-fixing and many other novel methods of manipulation are hitting the headlines quite often. The society has to be alert enough to keep the administration within Constitutional limits. An endeavour in this regard is a public cause and requires the involvement of all of us.
(The writer, a Senior Advocate, is a former All India Service officer, a former diplomat, a former editor, a former President of Orissa High Court Bar Association and a former Advocate General of Odisha jayantdas@hotmail.com)