Allowed

P. Narayana Reddy v. The Government of Andhra Pradesh, rep. by its Principal

Telangana HC5 Mar 2010WP/1338/2009

Case brief

AI extract

What is this about?

This court quashed a Government Order awarding a road construction contract by nomination. Ruling that deviation from the tender process requires strictly proven urgency, the court found no valid justification for bypassing public tenders. The judgment emphasizes Article 14 compliance in public contracting.

What did the court decide?

G.O.Rt. No.1830 dated 20.12.2008 was quashed; respondents directed to invite tenders for the road contract.

P. Narayana Reddy Vs The Government… — Constitutional and Fundamental Rights | Telangana HC (2010)

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*** THE HON’BLE SRI JUSTICE GODA RAGHURAM**

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AND

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*** THE HON'BLE MR JUSTICE RAMESH RANGANATHAN**

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+ WRIT PETITION NO. 1338 OF 2009

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% 05.03.2010

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# P.Narayana Reddy and 2 others

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….. Petitioners

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Vs.

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$ The Govt. of A.P. rep. by its Principal Secretary, Transport R & B Department Secretariat, Hyderabad and 3 others.

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…..Respondents

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! Counsel for the petitioner: Sri P.Veera Reddy

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^ Respondents No.1to 3 : Sri S. Sriram, Spl. Govt. Pleader

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Respondent No.4 : Sri B. Adinarayana Rao

< Gist:

>Head Note

[1] 1988(1) SCC 166=AIR 1988 SC 157

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2 1979(3) SCC 489

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3 (1985) 3 SCC 267

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4 2000(8) SCC 262

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5 2007(1) Supreme 704

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6 (1994) 6 SCC 651 7 1980(4) SCC 1 8 2009(3) Supreme 429 9 1981 (1) SCC 568 10 1990(3) SCC 752 111991(1) SCC 212

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12(1993) 1 SCC 445 13(2009) 7 SCC 561 14(1999)6 SCC 464 15(1991) 4 SCC 54 161987(1) SCC 227 17(2003) 7 SCC 546 18(2004) 11 SCC 1 191993(2) SCC 703

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THE HON'BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN

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WRIT PETITION No.1338 OF 2009

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ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan)

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This writ petition is filed in public interest to declare G.O.Rt. No.1830 Transport, Roads & Buildings (R-1) Department dated 20.12.2008 issued by the 1^st respondent entrusting the work of formation of the road, from Mangapatnam to K. Sugumanchipalli Village i.e., K.M 0/0 to KM 30/30 on State Highway No.31, on nomination basis to the 4^th respondent as arbitrary and against public interest.

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Facts, in brief, are that the Galeru Nagari & Sujala Sravanti (GNSS) project envisages drawal of 38.0 tmc of surplus flood waters from the Krishna river to provide irrigation facilities over an extent of 2.60 lakh acres in the drought prone areas of Kadapa (1,55,000 acres), Chittoor (1,03,500 acres) and Nellore (1,500 acres) districts besides meeting the drinking water needs of a population of 10 lakhs. Keeping in view the magnitude of the project it was proposed to take up the works in a phased manner. In March, 2005 the first phase, which involved the works of formation of the Gandikota Reservoir, Vamikonda Sagar reservoir, Sarvaraja Sagar Reservoir including earth work excavation of the GNSS main canal from km. 0.000 to Km. 32.640 and construction of

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cross masonary and cross drainage (CM & CD) works along with distributory system, were taken up. A proposal was submitted for construction of the Gandikota reservoir at FRL + 209.00 M with a storage capacity of 16.850 TMC and administrative approval was granted vide G.O.Ms.No.53 dated 10.6.2004 for Rs.560.00 Crores. As a result 14 villages, in and around Gandikota reservoir, fell under submergence. In addition the Renigunta-KadapaRayalacheruvu State Highway (SH-31) was expected to submerge for a length of 17.00 Kms.

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On their bid being found to be the lowest, the work of construction of the Gandikota reservoir was awarded to M/s Maytas – NCC (JV), Hyderabad for Rs.325.70 Crores under EPC Turnkey System. The Superintending Engineer, GNSS Circle, Kadapa, in his letter dated 20.8.2005, informed the Superintending Engineer, R & B, Kadapa of the partial submergence of State Highway No.31. The Superintending Engineer, R & B, vide letter dated 29.08.2005, submitted a proforma estimate for Rs.45.00 Crores for formation of the 17 KM road. Construction of this diversion road was, however, not taken up.

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On 14.02.2007 the Government decided to raise the FRL of Gandikota dam from + 209.00M to + 212.00 M and to enhance its capacity from 16.850 tmc to 26.850 tmc in order to provide irrigation facilities to the additional ayacut under lift schemes. As a result, another eight villages fell under submergence necessitating a change in the road alignment. On being directed to conduct a detailed investigation regarding the change in alignment the R& B officials, vide letter dated 29.5.2007, requested that Rs.20.00 Lakhs be deposited for carrying out such an exercise and the said sum was deposited vide cheque No.118606 dated 27.7.2007. The Government, vide memo No.1869/Maj. Irrigation VI/2007-1 dated 9.8.2007, instructed the Chief Engineer (Projects) Irrigation, Kadapa to obtain the estimated cost of the work through the Engineer-in- Chief (Roads) so as to accord revised administrative approval. On 24.11.2007 the R & B officials informed that the survey work, which had been entrusted to M/s VAX consultants, Chennai, had to be

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stopped as the new road alignment could not be finalized until the Railways finalized the alignment of the new railway track. On 7.1.2008 the site was jointly inspected by the Railway officials, R & B department officials and Irrigation department officials and the offtake point of the new railway alignment was agreed upon. The Superintending Engineer, R & B Circle, Kadapa, vide letter dated 20.2.2008, informed that, consequent upon the FRL of the Gandikota reservoir being raised to + 212.00 Meters, the Renigunta- Kadapa– Rayalacheruvu road fell under submergence for a length of 29 km. He communicated the estimates for the new road with 2 lane carriage way at Rs.86.00 crores, and with 4 lane carriage way at Rs.160.00 crores. The Government, vide memo dated 24.3.2008, directed that Rs.86.00 Crores be deposited with the R & B Department for formation of the new two lane road. In their letter dated 07.03.2008 the Railways, while acceding to the proposal for permanent shifting of the railway track, requested that Rs.226.45 crores be deposited for its construction. On 2.1.2009 the Railways modified their request to Rs.196.17 crores. The amount required to be deposited with the Railways was later finalized at Rs.185.04 crores which the State Government deposited in instalments from July, 2008 to July, 2009. The Railways, vide letter dated 24.6.2008, informed the State Government of the extent and location of the land to be acquired by the State to enable the Railways to lay a new track. Land acquisition proposals for 235 Acres were initiated and compensation was paid during the period October, 2008 to April, 2009 and construction of the new railway track work is said to be at an advanced stage of completion.

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The 3^rd respondent, vide letter dated 5.6.2008, recommended to the 2^nd respondent that the work of re-formation of the State highway, estimated at Rs.121 crores, be entrusted to the 4^th respondent on nomination basis as the work of construction of Gandikota project for Rs.329.75 Crores had earlier been awarded by the Irrigation Department to them. In the review meeting held on 6.8.2008, the Chief Minister directed that, in view of the urgency, execution of the two lane diversion road be entrusted on nomination basis to the agency

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executing the dam i.e., the 4^th respondent so as to complete the same expeditiously. After the survey work, relating to formation of the new diversion road alignment for a length of 29 Kms, was completed land acquisition proposals were submitted on 22.11.2008. The Government initiated land acquisition proceedings and paid compensation for acquisition of 197.34 acres of land during the period December, 2008 to September, 2009. Acquisition proceedings, for the remaining 241.93 acres, is said to be under process (DN & DD; PV stage).

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The Government, vide G.O.Rt. No.1830 dated 20.12.2008, accorded permission for the road work of 121 crores to be entrusted to the 4^th respondent on nomination basis as formation of the diversion road was essential to store water in the Gandikota Reservoir to derive partial benefits under the Gandikota lift irrigation Scheme, Gandikota-Chitravathi Balancing Reservoir Lift Schemes, CBR Right Canal Scheme (Lingala Canal System) and Pulivendula Branch Canal (PBC) System and as execution of these schemes was in progress. Pursuant thereto the State Government entered into an agreement with the 4^th respondent on 11.2.2009 and on the same day the site was handed over to them.

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Counter affidavits have been filed on behalf of all the respondents. In addition, the Secretary, Irrigation department has filed two additional affidavits dated 02.12.2009 and 02.02.2010. Oral arguments were advanced by Sri P. Veera Reddy, Learned Counsel for the petitioner, Sri S. Sriram, Learned Special Government Pleader appearing on behalf of the Learned Advocate General and Sri B. Adinarayana Rao, Learned Counsel for the 4^th respondent. On the pleadings, and oral submissions made by Counsel on either side, the questions which arise for determination have been categorized under the following heads:-

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IS THE REQUIREMENT OF AWARDING CONTRACTS BY A TENDER PROCESS AN INVOILABLE RULE?

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Sri P. Veera Reddy, Learned Counsel for the petitioner would submit that the

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Executive Engineer, R & B Department could entrust works on nomination basis only for Rs. 20,000/-, the Superintending Engineer could award such works only for Rs.50,000/and the Chief Engineer could allot such works upto Rs.2.00 Lakhs; award of a contract worth Rs.121.00 Crores on nomination basis was unheard of; the Government should have invited tenders for the work; there was no valid basis or justification for award of the contract on nomination basis when the estimated value of the contract was high; if tenders had been called for a larger number of contractors would have offered to execute the work at lesser rates; public revenue, running into crores of rupees, would have been saved thereby; the government could not act arbitrarily at its sweet will to confer largesse on persons of its choice that too at the cost of the State; and such action was unreasonable and contrary to larger public interest.

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On the other hand Sri S. Sriram, Learned Special Government Pleader appearing on behalf of the Learned Advocate General, would submit that award of contracts through the tender process was not an inviolable rule; and deviation from the said norm could be justified on facts. He would rely on Haji T.M. Hassan Rawther v. Kerala Financial Corpn^[1] .

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While entering into contracts, or granting other forms of largesse, the Government cannot act at its sweet will and, like a private individual, deal with any person it pleases. Its action must conform to standards or norms which are not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largesse, including award of contracts, must be confined and structured by rational, relevant and nondiscriminatory standards or norms and, if the Government departs from such standards or norms in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown that such departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.

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(Ramana Dayaram Shetty v. International Airport Authority of India^[2] ; Ram & Shyam Co. v. State of Haryana^[3] ) .

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When State largesse is decided to be conferred, resort should be had to inviting tenders. That would be a sure method of guaranteeing compliance with the mandate of Article 14 of the Constitution. (Netai Bag v. State of W.B^[4] ) . Contracts by the State must, normally, be granted by inviting tenders from eligible persons and the notification inviting tenders should be advertised in well known dailies having wide circulation in the locality. Award of Government contracts through public tender ensures transparency, maximises economy and efficiency, promotes healthy competition among the tenderers, provides for fair and equitable treatment of all tenderers, and eliminates irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution. (Ram and Shyam Company³ ; Nagar Nigam, Meerut v. Al. Faheem Meat Exports Pvt. Ltd^[5] ) .

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Transparency in grant of public contracts and compliance with Article 14 of the Constitution would, inter alia, be ensured by holding public auction upon issuance of advertisement in well known newspapers. Ordinarily the State or its instrumentalities should not give contracts by private negotiation but by open public auction/tender after wide publicity. (Nagar Nigam, Meerut⁵ ).

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There are inherent limitations in the exercise of contractual powers by the Government as it is the guardian of the finances of the State and is expected to protect the financial interest of the State. (Tata Cellular v. Union of India^[6] ) . The Government cannot act in a manner which would benefit a private party at the cost of the State; such action would be both unreasonable and contrary to public interest. (Kasturi Lal Lakshmi Reddy v. State of J & K^[7] )

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The Executive does not have an absolute discretion. Certain principles have to be followed, public interest being the paramount consideration. (Meerut Development Authority v. Association of Management Studies^[8] ) . For securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner. A decision, even in the matter of awarding or refusing a contract, must be arrived at after taking into account all relevant considerations and eschewing all irrelevant ones. Once the State decides to grant any right or privilege to others, there is no escape from the rigour of Article 14. (Meerut Dev. Authority⁸ ). Philanthropy has no part while dealing with a contractor entrusted with the execution of a contract. If the decision in respect of commercial transactions is influenced by extraneous considerations, which it ought not to have taken into account, the ultimate decision is bound to be vitiated even if it is established that such decision had been taken without bias. (Kasturi Lal Lakshmi Reddy⁷ ). The action or the procedure adopted by the authorities, while awarding contracts, can be judged and tested in the light of Article 14 of the Constitution. (Ramana Dayaram Shetty² ; Kasturi Lal Lakshmi Reddy⁷ ; Fertilizer Corpn. Kamagar Union (Regd.) Sindri v. Union of India^[9] ; Ram and Shyam Co.³ ; Haji T.M. Hassan Rawther¹ ; Mahabir Auto Stores v. Indian Oil Corpn .^[10] ; Shrilekha Vidyarthi v. State of U.P^[11] ; Sterling Computers Ltd. v. M & N Publications Ltd. ,^[12] ) . The norms and procedures prescribed by the Government, and indicated by Courts, have to be strictly followed while awarding contracts which have, along with a commercial element, a public purpose. (Sterling Computers Ltd.¹² ).

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However in exceptional circumstances, and for justifiable reasons, the tender route can be deviated from and a contract can be awarded by nomination. Non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner. Making an exception to the

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general rule could be justified by the State executive, if challenged in appropriate proceedings. Though the State cannot escape its liability to show its actions to be fair, reasonable and in accordance with law, yet wherever a challenge is thrown to any such action, the initial burden of showing the prima facie existence of violation of the mandate of the Constitution lies upon the person approaching the Court. (Netai Bag⁴ ).

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In rare and exceptional cases, having regard to the nature of the largesse or for some other good reason, a contract may be granted by private negotiation, but normally that should not be done as it shakes public confidence. (Ram and Shyam Company³ ; Nagar Nigam, Meerut⁵ ). There may be cases where, in the special facts and circumstances and due to compelling reasons which must stand the test of Article 14 of the Constitution, departure from this rule can be made. (Kasturi Lal Lakshmi Reddy⁷ ). Instances of such rare and exceptional cases are: during natural calamities and emergencies declared by the Government; where there is a single source only; where the 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. The normal rule of awarding contracts by public tender may, in the aforesaid instances, be departed from and such contracts may be awarded through 'private negotiations'. (Nagar Nigam, Meerut⁵ ).

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The petitioner has discharged the initial burden of establishing prima facie violation of the well accepted norm of awarding contract by invitation to tender. The burden, therefore, shifts on the State to establish that its action in awarding the contract, of laying the diversion road, to the 4^th respondent on nomination basis is fair, reasonable and in accordance with law.

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IS THE CONTRACT FOR EXECUTION OF THE DIVERSION ROAD A

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SUPPLEMENTAL ITEM OF WORK REQUIRED TO BE EXECUTED BY THE VERY SAME CONTRACTOR WHO WAS AWARDED THE ORIGINAL CONTRACT OF CONSTRUCTION OF THE GANDIKOTA DAM?

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Sri S. Sriram, Learned Special Government Pleader, would submit that the impugned road work was a supplemental item of work and, as stipulated in the Memo No.136 dated 19.1.1980, was required to be executed by the contractor who was awarded the original work. It is, therefore, necessary to refer to the administrative instructions issued in Memo No.136/COD/80-1, I &P. (PW) Department dated 19.01.1980 which relates to acceptance of tenders, and correction of rates in tenders. The relevant portions of the Memo read thus:

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Note:1. Tenders should invariably be called for when the amount involved in a particular contract is (Rs.5,000) or more. If it is proposed, in any case whether for urgency or any other reasons to be recorded to depart from the rule, works may be entrusted on nomination at rates not exceeding estimate rates by the Executive Engineer, Superintending Engineer or Chief Engineer upto the following limits indicated against each.

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Executive Engineer Rs.10,000 Superintending Engineer Rs.25,000 Chief Engineer Rs.50,000

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When tenders are dispensed with in the case of contracts exceeding Rs.20,000/- a report should be made by the officer entrusting the work on nomination to the next higher authority indicating the reasons for dispensing with the tenders. When the amount involved is less than (Rs.5,000) the Executive Engineer may call for tenders or not at his discretion. (Inst. By G.O.Ms. No.361. Tr, R&B.(B.I) Dept. Dt.2.3.1985)

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Note:6. When once tenders have been called for a work in accordance with Note (1) above, ‘supplemental’ or ‘additional’ items may be entrusted to the original contractor dispensing with tenders as follows subject to the provisions of Para 176(e) of APPW ‘D’ Code.

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1. Such items of work that are found necessary after letting out a contract and cannot be taken up for execution independently without interfering with the original work let out and have necessity to be executed along with the original contract shall be considered as ‘Supplemental items of work contingent of the original contract’.

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2. Supplemental items of work contingent on the main contract have to be necessarily carried out through the original contractor as ‘authorised extra’ by entertaining into a supplemental agreement(s). The power for executing original contracts according to delegation of powers in force regarding of who has

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executed the main contract in a given case, subject however to the condition that if the net effect of supplemental agreements to be entered into is to enhance the total value of work under the main and supplemental agreement to such an extent as sanction to revised estimate is required to a higher authority then sanction of the revised estimate from the higher authority shall be obtained before entering into supplemental agreement(s).

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3. Such items of works that are found necessary after letting out a work and be executed independently without affecting or interfering with the execution of the work let out, shall be considered as ‘Additional items to work not contingent on the original contracts’. Such additional items of work may be let out after call of tenders. However, if tender call is considered undesirable and it is considered necessary to entrust the item of wok on nomination to the original contractor involving the provision in Note (1) above it may be done so, provided the total value of such additional items does not exceed upto which the officers can entrust works without calling for tenders as per the delegation of powers in force. If the value of the items exceeds the limit, approval of the next higher authority shall be obtained. They can be executed only after separate estimate or a revised estimate or a workslip containing the additional items is sanctioned/approved by the competent authority. Entrustment of such items shall be at rate not exceeding the estimate rate.

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(Subs. By G.O.Ms. No.169, TR, R&B(CI) Dept, Dt.25.5.1981)

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While Note-6 of the Memo dated 19.01.1980 enables supplemental items of work to be entrusted to the original contractor upon dispensing with the tender process, Note 6(1) makes it clear that it is only such items of work that are found necessary, after letting out a contract, but cannot be taken up for execution independently without interfering with the original work let out, and have the necessity to be executed along with the original contract, which are required to be considered a supplemental item of work contingent to the original contract. The original work of construction of the Gandikota reservoir is an irrigation work. The road work awarded to the 4^th respondent, on nomination basis, is a work which can be executed independently without interfering with the original work. It is not even the case of the respondents that this road work has to be executed simultaneously with the original contract. The very fact that the Gandikota reservoir work is said to be almost complete, and the road work was not even taken up for execution when this Writ Petition was filed is itself proof that the road work can be executed independent of

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the original work.

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As the impugned contract is not a work which is a supplemental item of the original contract, the administrative instructions in Memo dated 19.1.1980 do not require the said work to be awarded to the original contractor. The Government was, therefore, not obligated to have the road work executed only through the original contractor, i.e., the 4^th respondent, on a nomination basis without resorting to the tender process. Award of the impugned work to the 4^th respondent on nomination basis cannot, therefore, be justified on this ground.

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WAS THE NECESSITY OF LAYING THE DIVERSION ROAD SO URGENT AS TO DEVIATE FROM THE ACCEPTED NORM OF AWARDING CONTRACTS THROUGH THE TENDER PROCESS?

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Sri P. Veera Reddy, Learned Counsel for the petitioner, would submit that there was no justification in awarding such a huge work on nomination basis; and it could not be said that formation of the diversion road was urgently required as several components of the work are still pending.

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Sri S. Sriram, Learned Special Govt. Pleader, would submit that the diversion road had to be urgently laid as the existing road would submerge on completion of construction of the Gandikota reservoir; residents of the villages which were under submergence had refused to shift to the rehabilitation centres till the diversion road was formed; delay in laying the diversion road, and in shifting villagers to the rehabilitation centers, would necessitate water not being released from the Gandikota reservoir thereby depriving several farmers of their irrigation and drinking water needs; the decision to lay the diversion road was taken by the Government in June, 2008 and the impugned work was awarded on nomination to the 4^th respondent soon thereafter; the process of inviting and finalizing tenders would take around four months; to avoid the delay which would arise on

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adhering to the tender process the Government had decided to award the work to the 4^th respondent whose men and machinery were readily available at the site; this Court would not sit in judgment over the opinion formed by the Government regarding urgency; it should, ordinarily, defer to the wisdom of the executive in such matters and not substitute its opinion for that of the Government.

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Sri B. Adinarayana Rao, Learned Counsel for the 4^th respondent, would submit that this Court, in exercise of its powers of judicial review, would not make a roving enquiry to decide whether or not there was urgency; this Court lacked the expertise to adjudicate on these aspects; and the scope of judicial review in such matters was limited only to an examination of the question whether or not the work was awarded for extraneous reasons. Learned counsel would rely on Villianur Iyarkkai Padukappu Maiyam v. Union of India^[13] .

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If the contract has been entered into without ignoring the procedure which can be said to be basic in nature, and after an objective consideration of different options available taking into account the interest of the State and the public, the Court cannot then act as an appellate court and substitute its opinion in respect of the person selected for entering into such a contract. The Courts can, however, examine whether the 'decision making process' was reasonable, rational, not arbitrary and violative of Article 14. (Meerut Dev. Authority⁸ ).

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If the agreement has been executed without following the essential procedures, and taking into consideration irrelevant factors, can it be said that the “decision-making process” before the agreement was entered into was consistent with the requirement of Article 14 of the Constitution? In such a situation there is no scope for the argument that any interference by the Court would amount to an intervention like a Court of appeal. Once

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the process through which the agreement was executed is held to be against the mandate of Article 14 of the Constitution, the agreement shall be deemed to be void. (Kasturi Lal Lakshmi Reddy⁷ ).

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Every decision of an authority, except a judicial decision, is amenable to judicial review. Judicial review is permissible if the impugned action is against the law or in violation of the prescribed procedure or is unreasonable, irrational or mala fide. (M.I. Builders (P) Ltd. v. Radhey Shyam Sahu^[14] ) . Judicial review of the exercise of contractual powers by the Government is to prevent arbitrariness or favouritism. Judicial review is concerned with reviewing not the merits of the decision, but the decision-making process itself. The grounds upon which an administrative action is subject to control by judicial review can be classified as (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality: namely, Wednesbury unreasonableness. (iii) procedural impropriety: While the Government must have the freedom of contract, and a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere, the decision must, however, not only be tested by the application of the Wednesbury principle of reasonableness but must also be free from arbitrariness, not affected by bias or actuated by mala fides. The duty of the court is to confine itself to the question of legality. Its concern should be (1).whether a decision-making authority has exceeded its powers?; (2).committed an error of law; (3).committed a breach of the rules of natural justice; (4).reached a decision which no reasonable tribunal would have reached; or (5).abused its powers. (Tata Cellular⁶ ).

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General propositions do not decide concrete cases. It is for the Court to decide, in the given facts and circumstances, whether the action complained of is unreasonable? How to do that is always a complex and complicated one. In law, context is everything. (Meerut Dev. Authority⁸ ). It is open to the Court to review the decision-maker’s

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evaluation of the facts. The Court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way cannot be upheld. (Tata Cellular⁶ ).

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It is necessary to note that the work of construction of the Gandikota reservoir, including the earth work excavation of GNSS main canal, construction of cross masonry and cross drainage works along with distributory system, was taken up in March, 2005. The Government, vide G.O.Ms.No.53 dated 10.6.2004, granted administrative approval for construction of the Gandikota reservoir at FRL + 209.00 metres with a storage capacity of 16.850 TMC. At FRL + 209.00 meters, around 14 villages were under threat of submergence necessitating a diversion road of 17.00 KMs in length to be laid. On 29.08.2005 the Superintending Engineer submitted proforma estimates for Rs.45.00 Crores to execute the said work. On 14.2.2007 the Government decided to raise the FRL of the Gandikota Dam from +209.00 meters to +212.00 meters and to enhance its capacity from 16.850 tmc to 26.850 tmc. For nearly one and half years, between 29.8.2005 when the proforma estimates were submitted till 14.2.2007 when the height and storage capacity of the dam was decided to be raised, the Government showed no urgency in having the diversion road of 17.00 KM laid.

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Consequent upon the Government’s decision to enhance the height of the Dam and its storage capacity eight more villages fell under submergence necessitating a change in the alignment of the diversion road. The delay in finalizing the road alignment is attributed to procrastination by the Railways in finalizing the alignment of the new railway track. On 7.1.2008 officials of the State Government and the Railways jointly decided on the off-take point for the new railway track alignment. The Superintending Engineer, vide letter dated 20.2.2008, informed that a diversion road of 29 KMs in length was required to be laid on account of the FRL at Gandikota reservoir being raised to + 212.00 Meters.

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The 3^rd respondent, by his letter dated 05.06.2008, informed the Secretary to the Government, Irrigation Department that the Superintending Engineer had, vide letter dated 20.02.2008, communicated a revised line estimate of Rs.86.00 Crores for formation of the new road with two lane carriage way; the Government, vide Memo dated 24.03.2008, had accorded permission; release of payment was under process; the GNSS Project was one of the prioritized projects which contemplated storage of water in the Gandikota Reservoir upto the FRL by the next season i.e., by August, 2009; it would not be possible to store water to the full contemplated level in this season because diversion of the Railway Track, Road, submergence and R&R of 22 villages was not complete; it was proposed to store water to the full level during the next flood season by September, 2009, after completion of these activities; and it was essential to take up the road work on priority after completion of Land Acquisition, and to complete it in one year i.e., by August, 2009. He further stated that the basic items of Road work would be Earth work and Bridges, major and minor culverts apart from Bituminous top work; in order to complete the work in a short period of one year it was feasible to entrust the work to the existing Gandikota Dam agency i.e., the 4^th respondent who had all the machinery and concrete equipment and was experienced in executing major works including road works. The third respondent further stated that the work would be carried out as per specifications/designs of the R&B Department and would be executed under their supervision; the ongoing work of Gandikota Dam was nearing completion; the existing agency would be able to take up and complete the new road work in one year; by entrusting the new road work to the existing agency it would be possible to complete the same as per schedule which would enable water to be stored in the Gandikota Reservoir during 2009.

¶80

In the meeting held on 06.08.2008, among other subjects in the agenda, the subject relating to the formation of Kadapa-Tadipatri double lane road came up for discussion. The Chief Minister directed the R&B Department to take up the two lane road from out of

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the proposed four lane State High Way immediately in view of the urgency to rehabilitate the project affected families. He further directed that the said work should be taken up immediately by the existing agency of Gandikota Dam on nomination basis duly following the procedure. The 1^st respondent agreed to take up the work costing about Rs.86 crores under R&B Department specifications, with funds to be provided by the Irrigation Department to the extent of the two lane road. It was agreed that this road would be integrated later into the four lane road being proposed under B.O.T. The District Collector was asked to compete Land Acquisition for the road work immediately keeping in mind the future needs of the four lane road also.

¶82

The Gandikota Dam, being executed by the 4^th respondent, is an irrigation work whereas the diversion road of 29 KMs is a road work. The machinery required for irrigation work is different from what is required for a road work. The contention that the work was awarded to the 4^th respondent as his men and machinery were readily available at the site does not, therefore, merit acceptance. On a specific querry from the Court, Learned Special Government Pleader would fairly state that there was no material on record to show that the 4^th respondent was executing another road work in and around the Gandikota reservoir.

¶83

The urgency for execution of the diversion road is also attributed to the refusal on the part of the villagers residing in the submerged villages to shift to the rehabilitation centres till the diversion road was completely laid. The Rehabilitation and Resettlement policy, notified in G.O.Ms. No.68 dated 8.4.2005, required a project displaced family, owning a house which was acquired for the project, to be allotted a house site free of cost upto a maximum of 150 sq. meters of land in rural areas and 75 sq. meters of land in urban areas. The R&R policy required a one time financial assistance to be provided to project displaced families below the poverty line. The extent of land to be given to each project

¶84

affected family was enhanced, vide G.O.Ms.No.76 dated 13.4.2006, upto a maximum of 202 Sq. meters in rural areas. In order to provide civic amenities to the project affected families, who had to be resettled on submergence of their villages consequent upon water being fully impounded in the Gandikota reservoir, five R & R centers viz., K. Sugumanchipalli, P.Ananthapuram, Kammavaripalli, Ponnathota and Obulapuram, were identified besides the new road alignment and infrastructural works commenced at these selected R & R centers from June, 2008. Plots, at these R&R centers, are said to have been allotted to the project affected families for constructing houses and construction activity is said to be in progress.

¶85

In the meeting held on 06.08.2008 the District Collector requested that the diversion road be taken up atleast as a two lane diversion road immediately in order to facilitate the new R&R centers being taken up near the proposed diversion road, to rehabilitate the project affected families of the Gandikota Reservoir who were to be evacuated by October, 2008, on priority basis. The District Collector requested that the Earthwork formation of the two lane road should begin immediately so as to facilitate evacuation of the project affected families as soon as the basic amenities in the R&R centers were put in place by October and November, 2008. The Chief Minister directed that the two lane road work should be taken up immediately in view of the urgent need to rehabilitate the project affected families. It was also decided to take up development of the lay-outs at the four locations identified by the District Collector and the Irrigation Department for re-settling the people affected by construction of the Gandikota Dam; and provide the minimum basic infrastructure facilities in the four identified sites, (like gravel roads, water supply and electricity), and entrust it on nomination basis to the EPC Agency executing the Gandikota Dam. The total cost of the minimum level of infrastructure to be provided at these locations was estimated to be approximately eight crores. The Chief Minister directed that the provision of minimum infrastructure facilities should be completed by the middle of September, 2008 and that shifting of people from the six villages, which were going to be

¶86

inundated when the Gandikota Dam was constructed upto crest level, should be completed by the end of October, 2008. It was also decided to examine the possibility of entrusting the work of construction of houses at the rehabilitation colonies to the EPC contractor of Gandikota project and complete the houses by the end of October, 2008 in view of the urgency for evacuating families from the villages likely to be submerged. The authorities were directed to examine the suitability of the type and design of houses constructed in Gangavaram Port, Visakhapatnam duly keeping provision for extension of the house in future as per the choice of the beneficiaries at a later date.

¶87

The data placed before this Court by the Secretary, Irrigation Department, along with her additional affidavit dated 02.02.2010, reveals that 4904 Project Affected Families were living in the 14 villages under submergence on construction of the Gandikota Dam upto FRL + 209.00 M and payments towards compensation for some of the structures in these villages were made as late as in the month of July, 2009. 5594 project affected families were living in the eight villages which were under threat of submergence on completion of construction of the Gandikota Dam at FRL + 212.00 M. The Statement, in Annexure II to the Additional affidavit dated 02.02.2010, shows that, while payment was made towards compensation for the lands under submergence in these villages for Rs.3,572.42 lakhs, payment towards compensation for the structures in these villages is not yet complete and payment was made towards structures, only in one of the villages, for Rs.702.51 lakhs. The statement of infrastructure facilities provided in the selected R&R centers shows that, while civic amenities like roads, drains, pipe culverts, water supply, electrification and community centres were completed in five villages, construction of gravel roads etc., in the sixth village is still in progress. The additional counter affidavit dated 02.02.2010 is silent as to whether all the 10498 project affected families have been paid compensation for their land and structures.

¶88

While a decision was taken, in the meeting held on 06.08.2008, to examine the

¶89

possibility of entrusting the work of construction of houses at the rehabilitation centers to the EPC contractor and complete the work by the end of October, 2008, it is evident from the additional affidavit dated 2.2.2010 that construction of houses at these R&R centers is still in progress. While refusal on the part of the villagers to shift from the villages under submergence is attributed to the delay in laying the diversion road, not only is there no material on record in support thereof but it is also evident that the R&R centers, wherein these project affected families are intended to be shifted, is not yet ready for their occupation.

¶90

While the respondents would contend that it is essential to store water in the Gandikota reservoir to derive partial benefits under (a) Gandikota Lift Irrigation Scheme; (b) Gandikota-Chitravathi Balancing Reservoir Lift Schemes; (c) CBR Right Canal Scheme (Lingala Canal System) and (d) Pulivendula Branch Canal (PBC) System, the additional affidavit dated 02.02.2010 reveals that the aforesaid four schemes are not yet complete and that these schemes are still in “brisk progress”.

¶91

The tender process, commencing from issuance of a notification inviting bids till the tender is finalized, would take four months to complete. While the period of one year required for the road to be laid would remain constant irrespective of whether execution of the work is pursuant to a tender process or by nomination, the difference between having the work executed pursuant to a tender process, and on nomination basis, is only for a period of four months. Having taken more than ten months to take a decision to award the work of execution of the diversion road to the 4^th respondent on nomination basis, (i.e., from the Superintending Engineer’s letter dated 20.2.2008 till the Government, vide G.O.Rt. No.1830 dated 20.12.2008, accorded permission), the 1^st respondent cannot now be heard to say that the urgency for laying the diversion road was such that it could not even brook a delay of four months in taking the tender route. It is also evident that the R&R centres wherein the 10498 project affected families are required to be resettled is not yet fit

¶92

for their occupation and the four schemes for which, water from the Gandikota Reservoir is the source, is not yet complete. The plea of urgency necessitating award of contract on nomination basis does not, therefore, merit acceptance. The facts and circumstances of the case, when taken as a whole, do not logically warrant the 1^st respondent’s conclusion that the urgency to lay the diversion road was such as to necessitate deviating from the norm of awarding contracts through the tender process and instead have the work allotted on nomination basis. As the overwhelming weight of facts reveal that the tender process was avoided not because of urgency in having the road laid, there is no justification for avoiding the transparent tender process.

¶93

In Villianur Iyarkkai Padukappu Maiyam¹³ the Supreme Court observed:-

¶94

“……The plea raised by the learned counsel for the appellants that the Government of Pondicherry was arbitrary and unreasonable in switching the whole public tender process into a system of personal selection and, therefore, the appeals should be accepted, is devoid of merits. It is well settled that non-floating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner.

¶95

Generally, when any State land is intended to be transferred or the State largesse is decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. However, what is important to notice is that the old Pondicherry Port is very much in existence. This is not a case of establishment of new port at Pondicherry but this is a case of developing an existing port to meet rapid changes in transport technology and to improve the existing port facilities. The development of an existing port on build, operate and transfer basis can never be equated with intended sale of government land or transfer of State largesse.

¶96

This is not a case where a State asset is sought to be sold or the State is out to purchase goods. Such cases stand on a different footing from a major issue of economic development such as development of a port. Respondent 11 was called upon to develop the Pondicherry Port on BOT basis. Thus after development of the Port, the same will have to be retransferred to the Government of Pondicherry……..”

¶97

“……..It is true that one of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. But as noted earlier, this is not a case of sale of property by the State. Though public auction or inviting of tenders is the ordinary rule in case where the State Government proposes to dispose of a property, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule, the reasons indicated in this case for the departure are shown to be rational and are not suggestive of discrimination…..

¶98

“..........The Government is entitled to make pragmatic decisions and policy decisions which may be necessary or called for under the prevalent peculiar circumstances. The issue of privatisation of the Port had been engaging the attention of the Government of Pondicherry since 1973. The said issue had been delayed for a long time. Therefore, no fault can be found with the expert committee, with the various officers of the Government including the Chief Secretary, the Ministers, the Chief Minister and the Lieutenant Governor for deciding to develop the Port with the assistance of Respondent 11 and not just restricting the process to appoint a consultant. The sole purpose behind the said exercise was to ensure development of the Port in a proper manner and as expeditiously as possible.

¶99

It is necessary to mention that the Government of Pondicherry was trying to develop the Port and was looking for an appropriate partner. It must be remembered that technology for development of the Port would not be available for the mere asking of it. All the leading firms/companies were not found suitable to develop the Port and none of them has made grievance either before the High Court or before this Court regarding selection of Respondent 11 as developer of the Port. It is ultimately a matter of bargain. In such cases, all that needs to be assured is that the Government or the authority, as the case may be, has acted fairly and has arrived at the best available arrangement in the circumstances……….” (emphasis supplied) .

¶100

Reliance placed on Villianur Iyarkkai Padukappu Maiyam¹³ by the Learned Counsel for the respondents is misconceived. In the aforesaid judgment the Supreme Court noted that the existing port at Pondicherry was being developed to meet rapid changes in transport technology and to improve the existing port facilities on build, operate and transfer basis; the technology for development of the port was not available for the mere asking; and other leading firms and companies were found not suitable to develop the port. It is in such circumstances that the Supreme Court upheld the action of the Government in selecting the developer without taking the tender route. Unlike in Villianur Iyarkkai Padukappu Maiyam¹³ , the impugned contract relates to execution of a road work. It is not as if this road work can be executed only by the 4^th respondent or that no reasonable alternative or substitute exists. It is not as if tenders were invited on several occasions despite which no bidder had come forward to offer their bid or that the bids offered were very low. The facts and circumstances of the present case do not justify deviation from the well accepted and transparent norm of awarding contracts through the tender process instead of on nomination basis.

¶101

WOULD THE POSSIBILITY OF ESCALATION IN THE COST OF LAYING THE DIVERSION ROAD, ON A DIRECTION NOW BEING GIVEN TO ADHERE TO THE TENDER PROCESS REQUIRE THIS COURT TO REFRAIN FROM QUASHING THE IMPUGNED G.O.?

¶102

Sri S. Sriram, Learned Special Government Pleader, would submit that inviting tenders, for execution of the impugned work, may not be in public interest; while the work

¶103

awarded to the 4^th respondent was at (-)0.883% less than the estimates, bids received for similar road works ranged between 4% to 5% in excess of the estimates; cost of material and labour had increased manifold in the last one and half years and a direction to now call for tenders would adversely affect the public exchequer as the bids which would now be received, pursuant to an invitation to tender, may be far higher than the rates at which the work was awarded to the 4^th respondent on nomination basis.

¶104

The Superintending Engineer (R &B) Kadapa Circle informed the Superintending Engineer GNSS Circle, Kadapa, vide letter No.GNSS/AEE.1/2005 dated 21.2.2009, that the trend of tenders for Plan works and other scheme works in the Kadapa circle ranged from 4.20% to 4.99% excess in the year 2007-08 and 0.99% to 4.99% excess in the year 2008-09. It is necessary to note that the aforesaid letter dated 21.2.2009 is subsequent both to the impugned G.O. dated 20.12.2008 and the agreement dated 11.2.2009. It is evident, therefore, that these statistics did not form the basis for the Government’s decision to award the work to the 4^th respondent on nomination basis.

¶105

With a view to avoid placing financial burden on the State exchequer, which may possibly result on tenders being invited afresh, we had enquired from Sri B. Adinarayana Rao whether the 4^th respondent was willing to execute the impugned diversion road work at the same rates as was awarded to them i.e., for Rs.89.70 Crores without claiming escalation in rates. Learned Counsel made it clear that the 4^th respondent could not be fettered by any such restriction as to deny them their right to seek compensation for cost escalation as prescribed in the agreement dated 11.2.2009.

¶106

The increase in the cost of laying the diversion road which may now arise as a result of adhering to the tender process is unlikely to be much different from the escalation in rates which the 4^th respondent could well claim under the agreement on account of the delay in entrusting the work to them. The bogey of cost escalation does not, therefore,

¶107

merit acceptance.

¶108

As failure to adhere to the tender process in awarding the contract of laying the diversion road of Rs.89.70 crores, in the facts and circumstances of this case, is arbitrary and in violation of Article 14 of the Constitution of India, we deem it appropriate to quash the impugned G.O. i.e., G.O.Rt.No.1830 dated 20.12.2008. Before we do so we must deal with the objections raised by the 4^th respondent regarding the petitioners’ locus standi to maintain this writ petition.

¶109

LOCUS STANDI:

¶110

Sri B. Adinarayana Rao, Learned Counsel for the 4^th respondent, would question the petitioners’ locus-standi to file the present writ petition. He would submit that the Writ Petition, as filed, is not in public interest; the petitioners were residents of some of the villages which were under threat of submergence and it was in their personal interest to drag on the matter indefinitely so as to avoid relocation; as the petitioners had a personal stake in the matter they ought not to be permitted to question award of the work to the 4^th respondent on nomination basis.

¶111

I n Villianur Iyarkkai Padukappu Maiyam¹³ , on which reliance is placed by the Learned Counsel, the Supreme Court observed:-

¶112

“……….. As far as second preliminary objection regarding locus standi of the appellant to challenge the award of the contract for the development of the Pondicherry Port to Respondent 11 is concerned, this Court finds that the contract assailed in the writ petitions is purely commercial in nature. Neither the parties, which had participated in the process of selection of the consultant/developer nor one of those, which had expressed desire to develop the Pondicherry Port but was not selected, has come forward to challenge the selection procedure adopted by the Government of Pondicherry or the selection of Respondent 11 as developer of the Pondicherry Port.

¶113

The question of locus standi in the matter of awarding the contract has been considered by this Court in BALCO Employees’ Union v. Union of Indi a³ . This Court, after review of law on the point, has made following observations in para 88 of the judgment: (SCC p. 381)

¶114

“88. It will be seen that whenever the Court has interfered and given directions while entertaining PIL it has mainly been where there has been an element of violation of Article 21 or of human rights or where the litigation has been initiated for the benefit of the poor and the underprivileged who are unable to come to court due to some

¶115

disadvantage. In those cases also it is the legal rights which are secured by the courts. We may, however, add that public interest litigation was not meant to be a weapon to challenge the financial or economic decisions which are taken by the Government in exercise of their administrative power. No doubt a person personally aggrieved by any such decision, which he regards as illegal, can impugn the same in a court of law, but, a public interest litigation at the behest of a stranger ought not to be entertained. Such a litigation cannot per se be on behalf of the poor and the downtrodden, unless the court is satisfied that there has been violation of Article 21 and the persons adversely affected are unable to approach the court.”

¶116

From the passage quoted above it is clear that the only ground on which a person can maintain a PIL is where there has been an element of violation of Article 21 or human rights or where the litigation has been initiated for the benefit of the poor and the underprivileged who are unable to come to the court due to some disadvantage…………..” (emphasis supplied)

¶117

Action of the Executive, in disregard of the provisions of law, raise substantial issues of accountability of those entrusted with the responsibility of administration. It furnishes enough cause for an individual to approach by way of a writ petition. The authorities can neither be permitted to seek shelter under the technicalities of locus standi nor can they plead restraint in the exercise of discretion as grave issues of public concern outweigh such considerations. (Bangalore Medical Trust v. B.S. Muddappa^[15] ) .

¶118

In the present case, the impugned contract was awarded to the 4^th respondent on nomination basis and no tenders were invited. As such the question of a competing tender challenging award of this work to the 4^th respondent doe not arise. While the petitioners may not have the wherewithal to execute the road work, it is well to remember that law is a social auditor and this audit function can be put into action only when someone, with public interest in mind, ignites the jurisdiction of the Court. The possibility of receiving a bid, lower than the rate at which the work was awarded to the 4^th respondent on nomination basis plus escalation in rates which they could claim under the Agreement, on fresh tenders being invited cannot be ruled out. If public revenues are dissipated it would require a strong argument to convince the Court that representative segments of the public would have no right to complain of the infraction of public duties and obligations. (Fertilizer Corpn. Kamgar Union⁹ ). Even in cases, where the petitioner may have moved the Court for redressal of personal grievances the Court, in the interest of justice and in furtherance

¶119

of public interest, may enquire into the state of affairs of the subject matter of litigation. (Shivajirao Nilangekar Patil v. Dr Mahesh Madhav Gosav i^[16] ; Guruvayoor Devaswom Managing Committee v. C.K. Rajan^[17] ; Indian Banks' Assn. v. Devkala Consultancy Service^[18] ) . Larger public interest would require adherence to the norm of inviting tenders for award of contracts. The petitioner cannot, therefore, be non-suited merely because he is not a competing tenderer. Even if the petitioners were motivated by their personal interest of avoiding shifting from their villages, it must be borne in mind that if any other member of the public, to whom the motive and conduct alleged against the petitioners in the present case could not be attributed, could file such a Writ Petition for the same relief, this disability on the ground of personal motive would not attach to him. This being so, the relief claimed by the petitioners in the Writ Petition being in the nature of a class action, without seeking any relief personal to them, ought not to be dismissed merely on this ground, since this is a matter of public concern and relates to the good governance of the State itself. (Dr. Kashinath G. Jalmi v. The Speake r^[19] ) .

¶120

As we are satisfied that award of contract, for laying the diversion road, to the 4^th respondent by the proceedings in G.O.Rt. No.1830 dated 20.12.2008 is arbitrary and is liable to be quashed, we see no reason to non-suit the petitioner. The objection to the maintainability of the Writ Petition, on the ground of locus standi, must, therefore, fail.

¶121

Though the petitioners have referred to the fraud alleged to have been committed by the management of Satyam Computers Limited in support of their contention that, for extraneous reasons, undue favour was extended by the political party in power to M/s Satyam Computers Limited, Maytas Infra Ltd, Maytas Properties Ltd, etc., we see no reason to express any opinion in this regard as the impugned G.O.Rt. No.1830 dated 20.12.2008 has been quashed on the ground that award of the diversion road work to the 4^th respondent on nomination basis is arbitrary and in violation of Article 14 of the

¶122

Constitution of India.

¶123

As a result, G.O.Rt.No.1830 dated 20.12.2008 is quashed. Respondents 1 to 3 shall forthwith take steps to invite tenders for award of the contract of laying the diversion road and proceed, thereafter, in accordance with law. The Writ Petition is allowed. However, in the circumstances, without costs.

¶124

______________________ GODA RAGHURAM, J

¶125

Date: .03.2010

¶126

__________________________________________________ RAMESH RANGANATHAN, J

¶127

MRKR/ASP

¶128

[1] 1988(1) SCC 166=AIR 1988 SC 157 [2] 1979(3) SCC 489 [3] (1985) 3 SCC 267 [4] 2000(8) SCC 262 [5] 2007(1) Supreme 704 [6] (1994) 6 SCC 651 [7] 1980(4) SCC 1 [8] 2009(3) Supreme 429 [9] 1981 (1) SCC 568 [10] 1990(3) SCC 752 [11] 1991(1) SCC 212 [12] (1993) 1 SCC 445 [13] (2009) 7 SCC 561 [14] (1999)6 SCC 464 [15] (1991) 4 SCC 54 [16] 1987(1) SCC 227 [17] (2003) 7 SCC 546 [18] (2004) 11 SCC 1 [19] 1993(2) SCC 703

P. Narayana Reddy v. The Government of Andhra Pradesh, rep. by its Principal

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P. Narayana Reddy v. The Government of Andhra Pradesh, rep. by its Principal

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