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Bombay High CourtIndian Cases

Subhash R. Acharya vs State Of Maharashtra Through The Dairy … on 16 August 2007

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Bombay High Court
Subhash R. Acharya vs State Of Maharashtra, Through The Dairy … on 16 August, 2007
Equivalent citations: 2007(109)BOM.L.R.1847, AIR 2008 (NOC) 2760 (BOM.) = 2008 (5) AIR BOM R 126 (DB), 2008 (5) AIR BOM R 126
Author: Swatanter Kumar
Bench: Swatanter Kumar, Ranjana Desai
JUDGMENT

Swatanter Kumar, C.J.

Page 1850

1. Rule. Respondents waive service. By consent Rule made returnable forthwith. Heard learned Counsel for the parties.

2. By this petition under Article 226 of the Constitution of India the petitioner prays for quashing of the order dated 21st August 2004 passed by the Page 1851 Section Officer, Government of Maharashtra, whereby the contract for recovery of entrance fee from vehicle drivers, who enter from three check nakas of Goregaon, Powai and Marol respectively in Aarey Milk Colony has been extended for a period of 3 years with effect from 17th February 2005 by increasing the contract amount by 5%. The petitioner contends that the said order is arbitrary, discriminatory, is in colourable exercise of power, denying fair competition and the same is also entirely to the disadvantage of the State, besides causing huge loss to the public exchequer. It is averred that respondent No. 6, Minister for Dairy Development Agriculture and Animal Husbandary, acted contrary to the known canons of administration. As a result of certain controversies raised and diverse stand taken by respondent No. 6 and the State Government, the question in regard to the ambit and scope of the powers exercisable by the Minister in terms of Maharashtra Government Rules of Business, although ancillary, is a pertinent question which is required to be answered by the court.

3. In order to answer the above legal questions appropriately, a reference to basic facts would be necessary. According to the petitioner, respondent No. 1 issued notices of inviting tenders in local newspapers on 30th December 2001. The tender related to the management of three toll nakas (points) within Aarey Milk Complex, Goregaon (East), Mumbai. Three different check posts held under this area are Marol, Powai and Goregaon. Respondent No. 1 had evolved a scheme of engaging contractors for collecting toll from vehicles passing through these toll nakas at three different rates for different categories of vehicles. The contractor is selected on the basis of the bid/tender called for that purpose. Notice inviting tenders is annexed at Exhibit A to the petition. In terms of Government Resolution No. AMC/1001/Case No 122/PDM/8 dated 2nd December 2001 the contract was to be awarded for a period of 3 years on the predetermined rates as approved by the Government. Respondent No. 5, vide letter dated 16th February 2002, informed respondent No. 2 that his bid/tender was accepted for recovery of traffic tax at Goregaon, Marol and Powai check posts and an agreement was entered into between the parties on 16th February 2002 for a period of 3 years, which expired on 16th February 2005. Exhibit B to the petition is a copy of the said agreement executed by the parties. Certain disputes had arisen, according to the petitioner, between respondent Nos 1 and 2, which were referred to the Commissioner of Dairy Development and the same were disposed of, vide order dated 22nd March 2002. This order was challenged in this Court by filing Writ Petition No 687 of 2002 and it was disposed of by order dated 26th April 2002. The said order reads as under:

Heard Mr. Hegde, learned Counsel for the Petitioner, Petitioner, Mr. Khatito, learned Counsel for respondent No. 2 and perused the Writ Petition, the documents annexed thereto and the Affidavit in reply filed “by Respondent No. 1 as well as Respondent No. 2 and the additional Affidavits,
2. Without going into the facts of the case in detail,suffice it to say that Respondent No. 2 viz, M/s. Garib Nawaz Corporation has been awarded contract for the recovery of entry fees (toll fees) in respect of Page 1852 vehicles taking entry in Arey Milk Colony, Goregaon from Goregaon, Marol and Powai ‘Chowk Posts. The said contract is for a period of three years. As per the said contract the Respondent No. 2 is required to pay a sum of Rs.l6.58 Crores for the contract for the period of three years and the said amount is required to be deposited by Respondent No. 2 at the rate of Rs.1,51,415/per day on Tuesday/Friday of the week in advance at the office of Chief Executive Officer, Arey, Goregaon. It appears that Respondent No. 2 committed some defaults in respect of security deposit as well as periodical deposits. Thus, the dispute arose “between the Respondent No. 2 and Chief Executive Officer, Aarey Milk Colony viz. parties to the contract and matter was referred to the Commissioner, Dairy Development (Arbitrator). The Arbitrator in his award dated 22nd March, 2002 observed that it is necessary that amount of Rs.16.58 Crores should be paid by Respondent No. 2 herein from time to time to the Government in accordance with the terms and conditions of the period during the period of three years and if the contractor is incapable or not desirous of complying with the conditions of the contract and for the said reason the contract is cancelled. The contract should be entrusted to other person as an alternative arrangement and if the amount receivable, by virtue of such contract is less than the amount of the present contract then the amount of loss should be recovered from Respondent No. 2 herein viz. Garib Nawaz Corporation. The Arbitrator also directed the Respondent No. 2 herein viz. M/s. Garib Nawaz Corporation to deposit the overdue amount of entrance fee upto 21st March, 2002 which is payable to the Government to the tune of Rs. 27,63,94l/alongwith penal interest and amount of entrance fee as per the contract as per daily rate on or before 30th March, 2002, failing which it would be assumed that they are not capable of continuing the contract and the contract will be cancelled as per condition No. 16 and 22 of the contract from midnight of 33.3.2002. The said order of Arbitrator has not been complied with by Respondent No. 2. as we are informed that Minister, Dairy Development has extended the time. We are unable to approve the order of Minister, Dairy Development in extending the time as such order cannot be said to have sanction of law. Besides that we are informed that the Chief Executive Officer has agreed for reduction of the contract amount to the extent of Rs. 5 Crores on the representation of the Respondent No. 2. To say the least such order of Chief Executive Officer is highly unjustified. In the matter off award of contract, if such action is upheld, it is bound to breed corruption and result in favouritism for extraneous consideration.
3. ‘We asked the learned Counsel for respondent No. 2 as to whether Respondent No. 2 is desirous of continuing with the contract as per the terms and conditions of the original contract at the rate of Rs.16.58 crores for the period of three years and periodical deposit as per the contract terms, the learned Counsel for Respondent No. 2 after seeking instructions submitted that the Respondent No. 2 undertakes to abide by terms and conditions of the original contract at a contract amount of Rs.l6.58 crores for a period of three years and accordingly, shall Page 1853 deposit the per day amount of entry fees at the rate, of Rs.1,51,415/in advance henceforth as per the terms of the contract.
4. In view of the submissions made by the learned Counsel for the parties, we dispose of the writ petition by following order:
i) The reduction of the contract amount to the tune of Rs.3 Crores by Chief Executive Officer is set aside.
(ii) The Respondent No. 2 viz. M/s. Garib Nawaz Corporation is directed to file an undertaking before this Court within three weeks from today that they would faithfully abide by the terms and conditions of the original contract entered into between Respondent No. 2 and the Chief Executive Officer, Arey Milk Colony for the recovery of entry fee (toll fee) in respect of vehicles taking entry in Arey Milk Colony, Goregaon from Goregaon, Marol and Powai Check Post. (iii) We direct Respondent No. 2 viz. M/s. Garib Nawaz Corporation to deposit the arrears of security deposit, if any computed at the contract amount of Rs. 1.58 crores within three weeks from today.
(iv) We also direct Respondent No. 2 viz. M/s. Garib Nawaz Corporation to pay the arrears in respect of amount of daily entrance fee, if any, as on date two weeks from today and henceforth continue to deposit the contract amount at the rate of Rs. 1,51,415/per day in advance as per contract.
(v) In the event of default of any of the terms aforestated, the contract in favour of Respondent No. 2 viz. M/s.Garib Nawaz Corporation shall stand terminated immediately and Respondent No. 2 shall be liable to all consequences following from such termination.
5. The order passed by the Arbitrator stands modified in terms aforestated.

4. It is the specific case pleaded by the petitioner that respondent No. 1, without inviting any fresh tenders and contrary to the terms and conditions of the contract and policy of the Government, on 21st August 2004, granted an extension for a period of 3 years on the same terms and increase of 5% in earlier rates. However, condition No. 5 of earlier contract was relaxed. This is clearly an arbitrary action amounting to malpractrice and causing huge loss to the State exchequer. It is also averred in the petition that one M/s Deepa Travels Ltd filed Writ Petition No. 353 of 2005 before this Court challenging the said extension. The said Petition was, however, withdrawn on 11th April 2005. Despite this the petitioner has questioned the legality and propriety of the said order on the ground that there are large number of persons who hold expertise and sufficient qualification to submit tenders for performing the said function and would have paid much higher amount than what was demanded by respondent No. 1, at the behest of respondent No. 6 from respondent No. 2. This action is stated to be contrary to law. In view of the terms and conditions of the agreement and notice inviting tenders, it is not permissible to grant extension in this fashion. It even contemplates that tender should be invited and if the highest bidder does not fulfil the obligation of the contract, same can be awarded Page 1854 prospectively to the second highest bidder. The petitioner, who is an advocate, submitted letters dated 5th October, 2006, 18th October 2006 and 18th November 2006 registering his complaint /grievance but of no consequence. The petitioner has tried to demonstrate the huge losses, which the Government is likely to suffer as a result of the arbitrary action. Certain information was obtained by the petitioner under the provisions of Right to Information Act, vide letter dated 21st December 2006 and supplied by the Respondent No. 5, vide their letter dated 10th January 2007, showing that there was no justification for respondent No. 2 to apply for extension of earlier contract period for further 3 years during the currency of the previous contract and for respondent No. 6 to grant such extension in most arbitrary manner. On this premise, petitioner prays that the extension granted to respondent No. 2, vide letter dated 21st August 2004, should be quashed and revoked. The petitioner also prays for a direction to appoint a committee to examine the loss caused to the State revenue and further prays that Respondent No. 1 be directed to invite fresh tenders.

5. On behalf of respondent Nos. 1, 3, 4 and 5, affidavitinreply is filed by the Chief Executive Officer, Aarey Milk Colony. The stand taken in that affidavit is that the allegations are primarily made against respondent No. 6, The Minister for Dairy Development, Agriculture, Animal Husbandary and on the basis of the record available in the office of the said Department, it is stated that the contract in dispute was awarded to the second respondent for the period from 17th February, 2002 to 16th February, 2005. Vide application dated 21st July, 2004, respondent No. 2 claimed that he was paying heavy license fees and if the fresh tenders are called, the Government may not get huge amount or equivalent to the amount being paid by the said respondent. Therefore, the contract for collection of tax on three check nakas may be extended for a period of three years by increasing fee at the rate of 5% and, accordingly, the conditions of the original contract may be amended. At the same time he also requested the Respondent No. 6 to waive condition No. 5. Respondent No. 6 called meetings in this regard on 21st July, 2004 and 17th August, 2004. In the note put up by the office it was mentioned that there was no provision for extending the period of contract and fresh tender should be invited. At best, the Government could extend the same by three months. The Desk Officer also stated that the file may be placed before the Law and Judiciary Department, Mantralaya, Mumbai. This view was endorsed by the Deputy Secretary of the Department. It appears that the then Secretary of the Department was on tour and file was put up to the Minister twice without the same having been seen by the Secretary. Respondent No. 6 approved the proposal on 19th August, 2004, for extending the contract as prayed for waived condition No. 5 of the original contract and directed insertion of a new condition allowing Respondent No. 2 to withdraw from the contract by giving 60 days notice to the Government. Again, approval was sought for issuance of the order and finally on 21st August, 2004, the order was passed and extension of contract was awarded to respondent No. 2 for a period of three years by increasing nominal 5 per cent contract amount. It is averred in the affidavit on behalf of the State that the amount of three years was worked out at Rs. 16.58 crores and was payable daily. The amount so payable per day Page 1855 works out to nearly Rs. 1,51,415/and on an annual basis it works out to approximately Rs. 5 crores. There was no occasion to consider second highest bidder as fresh tenders were not invited. Respondent No. 2 has already availed of the benefit of contract in his name without any liability and the Government claims to have suffered losses and now if the contract is awarded to a new contractor which is of a lower value than in terms of condition No. 5, respondent No. 2 should also make good loss to the Government.

6. During the course of hearing on 25th June, 2007, the learned Counsel appearing for respondent No. 6 sought time to seek instructions in view of the afidavit filed on behalf of the State and particularly paragrphs 5 and 6 of the said affidavit. On the next date of hearing on 28th June, 2007, the learned Counsel for respondent No. 6 again stated that the said respondent had decided to review his order which is subject matter of the present writ petition and, therefore, prayed for time. The Court had directed production of original records in Court.

7. Respondent No. 6, despite specific allegations made against him, chose not to file any affidavit. From the record produced in furtherance to the order of the Court, it appears that Mr. Anees Ahmed, Minister for Agriculture, Animal Husbandry, Dairy Development and Fisheries, during the pendency of the writ petition, had issued a show cause notice on 28th June, 2007, directing that the decision taken earlier may be reviewed. Written reply was filed on behalf of respondent No. 2 before the Minister and it was heard on 5th July, 2007 and after going through the records, the Minister vide his detailed order dated 11th July, 2007, held that the decision for extension of the agreement dated August 18, 2004 was for valid reasons. The relevant part of the said order reads as under:

After giving consideration to the oral and written submissions made by Shri Joshi learned Counsel, I am of the opinion that the earlier contract granted in favour of the said Corporation without inviting tenders was for valid consideration and it was best in the interest of the State from the point oif view of collection of toll. At the time when the decision for the extention of agreement was taken the link roads were expected to be operational by 2005, which could have caused substantial loss of revenue, as both the said link roads are toll free. The said link roads were, however, not operational in 2005, as contemplated earlier, but became operational in 2006. Since then, I am given to understand that the vehicular traffic on Aarey Milk Colony Road has substantially reduced. The decision taken by me in the year 2004 was, therefore, correct and valid for appropriate consideration. However, since objection has been raised of denying equal opportunity for other potential bidders by virtue of not issuing tender notice, carries a valid point and, therefore, it will be necessary to issue fresh tender notice calling for bids in the changed circumstances. The tenders are issued as and by way of practice by the Government Department and to provide equal opportunity to the citizens to deal with Government largesse. There was possibility earlier, of receipt of bid for lesser amount and, therefore, the decision to continue with the said Page 1856 corporation for collection of toll was taken. The interest of justice would, however, be served by allowing the said Corporation to continue with the collection of toll till fresh tender process is complete and the new contracting party is selected by the Government. Till that time the said Corporation be permitted to collect toll on same terms and conditions i.e. on payment of Rs. 1,58,987/per day to the Government as licence fee. Clause 24 of the agreement signed by the said Corporation provides the change of condition in the agreement by CEO, Aarey Milk Colony, and since the learned Counsel for the said Corporation Shri Bipin Joshi has also consented for the restoration of Clause 5 in its originalform incorporated in the agreement dated February 16, 2002, I hereby direct the restoration of the said clause in the Agreement signed by the said Corporation as it was incorporated in the agreement dated February 16, 2002.
I further direct that fresh tender notice shall be issued by the Department inviting bids at minimum Rs. 1,58,987/per day, which is presently being paid by the said Corporation as a precondition to enter the bids. Since during the pendency of completion of tender and bidding process, the Government as well as Aarey Milk Colony does not have any administrative machinery for collection of toll, the said Corporation be allowed to continue the collection of toll at the rate of Rs. 1,58,987/per day. Since the decision for extention of agreement dated August 18, 2004 was for valid reasons and consideration, the said agreement is not terminated, however, shall remain in force with the additional terms and conditions, as mentioned hereinabove, and till the new contracting party is selected by the Government of Maharashtra by following due procedure of law inviting tenders.
8. The question arose before the Court, whether the stand taken by the Minister in his order dated July 11, 2007 was the stand of the Government. During the hearing, it is revealed that the decision of the Minister was not quite acceptable to the Government. The Government was granted opportunity to state its stand on affidavit. Resultantly, additional affidavit dated 28th July, 2007 was filed on behalf of the State wherein it was specifically stated that the decision of the Minister was not acceptable to the Government and the reasons thereof were stated as under:

I say that Respondent No. 4, Secretary, Agriculture, Animal Husbandry, Dairy Development & Fisheries Department, Government of Maharashtra, sought the Government’s orders on its stand taken on the review order dated 11th July, 2007, passed by the Respondent No. 6. The stand of the Government is as under:
1) Extent of loss cannot be ascertained.
2) Relaxation of Condition No. 5 was not proper.
3) There are procedural lapses.
The review carried out by the Hon. Minister cannot be accepted by the Govt. as he has not terminated the earlier contract.

Page 1857

6. In any event, I say that the contract awarded by way of extension has not been terminated by action in issue by the Respondent No. 6 and therefore the said extension continue to benefit the contractor at the cost of the public exchequer.

7. I say that in the meantime, as per the directions given by the respondent No. 6, the respondent No. 5 has published the advertisement calling for the tender for collection of toll tax at 3 Check Nakas at Aarey Milk Colony. Hereto annexed and marked Exhibit1 is a copy of the said advertisement.

8. I say that in view of the aforesaid fact the decision of the respondent No. 6 in Review is not acceptable to the Government of Maharashtra.

Along with this affidavit, Exhibit1 was annexed which is the tender notice issued by the Chief Executive Officer, Aarey Milk Colony,Goregaon (East), Mumbai, inviting fresh tenders for three check nakas of that area.

9. Respondent No. 2 also filed an independent affidavit stating that the contract was awarded to him by the Chief Executive Officer on 23rd August, 2004, by enhancing royalty of 5 per cent for a period of three years. It is also stated that additional Bank Guarantee of Rs. 8,29,000/ for a period of three years was furnished by him, in addition to the Bank Guarantee already given as well as depositing an additional security deposit of Rs. 4,14,500/.

In this affidavit he has also given some instances wherein the Maharashtra State Road Transport Corporation had also granted extension in the same manner and even Mahanagar Telephone Nigam Limited also extended contract for sale of empty cable drums after the expiry of the tender period and thus it is a practice to extend contracts after the expiry of the tender period. On this basis, it is submitted that no procedural infirmity has been committed by the authorities in first awarding and then extending the contract to the said respondent which is valid upto 2008.

10. It may also be noticed that Notice of Motion No. 328 of 2007 was taken out by one Shaikh Afroz Ahmad, who claims that he is one of the contractors involved in the business and that the extension granted to respondent No. 2 permitting him to continue to collect the toll from three nakas should be cancelled as there is no power to grant such extension beyond the period of three months and the State should invite open tenders. He has further specifically averred that respondent No. 1 has awarded and extended period of many contracts after the expiry of the period specified therein in an arbitrary manner and he has given a few examples of such contracts, which read as under:

(i) I say that in respect of contract for Boat Club at Chota Kashmir at Aarey Colony, Goregaon (East), Mumbai in October, 2000, the contract for three years was bided by one Mr. Ashok Guru Singh, who was then successfully awarded the contract upto October, 2003. However, thereafter, from time to time, the contract has been extended in his favour without calling a fresh tender upto 2006 and till date, he continues to operate the Boat Club at Chota Kashmir, even though the extended period has also expired.
(ii) Similarly, in respect of Aarey Garden Restaurant, in October, 2000, the contract for three years was bided by one Mr. Sunil Tukaram Page 1858 Maradkar, who was then successfully awarded the contract upto October,2003. However, thereafter, from time to time, the contract has been extended in his favour without calling a fresh tender upto October, 2006 and till date, he continues to operate the said Aarey Garden Restaurant, even though the extended period has also expired.
(iii) In respect of Shailaja Provision Stores at Aarey Market, in February 2001 the contract for three years was bided by one Mr. M.N. Patel who was then successfully awarded the contract upto February, 2004. However, thereafter, from time to time, the contracct has been extended in his favour without calling a fresh tender upto February, 2007 and till date, he continues to operate the said Shailaja Provision Stores, even though the extended period has also expired.
(iv) In respect of a Jyotsna Stores at Aarey market, the contract for three years was bided by one Mr. S.S. Shah in February, 2001 who was then successfully awarded the contract upto February, 2004. However, thereafter from time to time, the contract has been extended in his favour without calling a fresh tender upto February, 2007 and till date, he continues to operate the same, even though the extended period has also expired.
(v) In respect of a Laundry at Aarey Market, the contract for three years was bided by one Mr. S.S. Shah in February, 2001 who was then successfully awarded the contract upto February, 2004. However, thereafter, from time to time, the contract has been extended in his favour without calling a fresh tender upto February, 2007 and till date he continues to operate the same, even though the extended period has also expired.
(vi) In respect of removal of water from wall behind Agriculture Department rest room and Gat No. 8, the contract for three years was bided by one M/s. Nilesh Enterprises in July, 2001 who was then successfully awarded the contract upto July 2004. However, thereafter, from time to time, the contract has been extended in his favour without calling a fresh tender upto July 2007 and till date, he continues to operate the same.
(vii) In respect of Plantation at Agriculture Department, Powai area – 19 acres and 20 gunthas, the contract for three years was bided by one Mr. Jatashanker R. Dubey in August, 2001 who was then successfully awarded the contract upto July, 2007. However, thereafter from time to time, the contract has been extended in his favour without calling a fresh tender upto July, 2007 and till date he continues to operate the same.
(viii) In respect of Plantation at Agriculture Department (Colony) area 24 acres and 22 gunthas, the contract for three years was bided by one Mr. Depak Manubhai Patel in September, 2001 who was then successfully awarded the contract upto September, 2004. However, thereafter, from time to time, the contract has been extended in his favour without calling a fresh tender upto September, 2007 and till date, he continues to operate the same.
Page 1859

(ix) In respect of Plantation at Agriculture department Powai, area 20 acres, the contract for three years was bided by one Mr. Parshuram R. Gutuka, in August, 2001, who was then successfully awarded the contract upto August, 2004. However, thereafter from time to time the contract has been extended in his favour without calling a fresh tender upto August 2007 and till date he continues to operate the same.

This Notice of Motion was heard along with the writ petition and the averments made in the affidavit in support of this Notice of Motion are not much in dispute.