Kanhaiya Lal Aggarwal v. Union of India case throws a light on the scope of judicial review of administrative actions and the freedom of government in performing the actions related to civil contracts, also it also describes the concept of the liability that is arising out of the contract.
Honourable Justice S. Rajendra Babu and honourable Justice P. Venkatarama Reddi.
- Article 226 or 32 of the Indian Constitution
- Article 298 of the Indian Constitution
- Article 14 of the Indian Constitution
- Article 12 of the Indian Constitution
FACTS OF THE CASE:
- Respondent no.1 has released a tender for the execution of the work including supply, delivery, and stacking of (75,000) 3 -meter machine crushed track ballast at Naurozabad depot and loading them onto the cargo trains within the period of 24 months. The contract states some terms and condition which are:
- It must state rates at which the work is to be done in both figures and words.
- If the works go beyond any rules and regulations mentioned in the contract, the same will be canceled at that particular time only.
- The offer must be opened for a period of 90 days from the date when the tender was released.
- Kanhaiya Lal, the appellant received 5 tenders and offers a rebate of 5%, 3%, 2% if the tender was accepted with the period of 45 days, 60 days, 75 days respectively, Also Respondent No. 5 made a similar offer of rate but at extended rate i.e. 1.25%, 1% if the offer is accepted within 30 and 45 days, respectively.
- Appellant tender was accepted and Respondent no. 5 filed a writ petition in Madhya Pradesh High Court against him claiming that his tender should have been accepted as he was providing lower rates as compared to the appellant.
ISSUES FRAMED BY SUPREME COURT:
- Whether the decision of the railway administration was discriminatory, arbitrary, mala fide, or disregarded mandatory procedure?
- Whether courts have the power to exercise their power of judicial review in cases related to government contracts and contractual liability of the state.
- Whether tender offered to the respondent with the
JUDGEMENT OF SUPREME COURT OF INDIA
Court held that when the government enters into any contract court is not willing to enter into a contract until and unless the contract is found to be unreasonable, arbitrary, or mala fide. In these situations, the court will not hesitate to rectify such action. SC referred GJ Fernandez v. State of Karnataka case and held when the terms and conditions are not followed then the person inviting the tender holds the full right to cancel the same at that time only.
It was concluded that since the appellant made his offer along with respondent no.5 who was a reputed businessman but not has the knowledge of the commercial practice of giving rebate as rebate offered by the appellant was a part of the tender, Hence Railway Administration has not made any mistake in accepting the appellant tender resulting SC dismissed the writ petition.
It is concluded that the government is free to enter into any contract with anybody, whether it’s an individual or an organization, but if the contract is done with an illegal intent, then the court has its power to intervene and exercise the power of judicial review. Therefore, the government cannot act arbitrarily so as to exclude another individual.