Municipal Contracts Cannot Be Awarded Through Private Negotiation, Without Tenders: J&K&L High Court

The Court held that such exercise of power cannot be left to the unfettered discretion of the authorities concerned, nor can it be exercised in a manner that is arbitrary, discriminatory, or contrary to the mandate of Article 14 of the Constitution of India.

The Court thus quashed the allotment of a public work in favour of a private respondent without inviting tenders and directed the respondents to undertake the process afresh by inviting tenders in open competition.

The Court was hearing a writ petition seeking a direction in the nature of certiorari to quash an allotment order whereby the construction of a toilet complex in Channi Himmat, Jammu, was allotted in favour of a private respondent without inviting any tenders or following any procedure.

The petition was heard by Justice M.A. Chowdhary, who observed,

“The Jammu Municipal Corporation, being a statutory body and an instrumentality of the State, is under a constitutional obligation to act fairly, reasonably and transparently in all matters involving distribution of public largesse and award of public contracts. Such exercise of power cannot be left to the unfettered discretion of the authorities concerned, nor can the same be exercised, in a manner, which is arbitrary, discriminatory or contrary to the mandate of Article 14 of the Constitution of India.”

Background

The petitioner challenged the allotment of the work of construction of a toilet complex in Sector No. 3, Ward No. 50, Channi Himmat, Jammu, in favour of the private respondent without inviting tenders.

The main grievance of the petitioner was that the official respondents had not adopted the legal recourse available to them, as the Municipal Corporation was under an obligation to invite tenders for the construction of the toilet complex, instead of allotting the same to the private respondent at its own whim.

The official respondents filed objections stating that in order to improve the sanitation condition, the Municipal Corporation was constructing toilet complexes and maintaining them. It was stated that earlier attempts for tendering were not successful and that the construction and maintenance of toilet complexes was being done by an NGO.

It was further stated that when the private respondent approached the respondent through the Housing and Urban Development Department, the work was allotted to it to encourage another NGO, which was also empanelled with the Department.

The respondents contended that the petitioner never approached the Municipal Corporation, as it had no office in Jammu, and that the allotment was granted after verifying the credentials of the organization. It was stated that the private respondent had been working in the field of sanitation throughout the country and had about 20 years of experience.

Court's Observation

The Court observed that the controversy revolved around the legality and validity of the allotment of a public work by a public authority without inviting tenders and adhering to any transparent and fair procedure.

The Court noted that the Municipal Corporation, being a statutory body and an instrumentality of the State, was under a constitutional obligation to act fairly, reasonably, and transparently in all matters involving the distribution of public largesse and the award of public contracts.

The Court relied on the judgment of the Hon'ble Supreme Court in Nagar Nigam, Meerut v. Al Faheem Meat Exports Pvt. Ltd. & Ors. (2006), which held,

“It is now a well settled principle of law that having regard to the provisions of Article 14 of the Constitution of India, a State within the meaning of Article 12 thereof cannot distribute its largesse at its own sweet will.”

The Court further noted the observation in the said judgment,

“It is well settled that ordinarily the State or its instrumentalities should not give contracts by private negotiation but by open public auction/tender after wide publicity.”

The Court held that the construction of the toilet complex constituted a public work involving the expenditure of public funds, and therefore, its allotment was required to be undertaken in a fair, transparent, and competitive manner. The Court held,

“The direct allotment of the aforesaid work in favour of the private respondent No. 6, without inviting tenders or providing any opportunity to other eligible persons to compete, prima facie, runs contrary to the constitutional mandate of fairness and non-arbitrariness enshrined under Article 14 of the Constitution of India.”

The Court rejected the justification furnished by the official respondents that the private respondent was an empanelled NGO with considerable experience in the field of sanitation. The Court held,

“The fact that private respondent No. 6 may have experience or expertise in the relevant field does not confer upon it any exclusive entitlement to secure a public contract, nor does such circumstance exempt the Municipal Corporation from complying with the requirements of transparency, fairness and equal opportunity.”

The Court further held that the plea of the official respondents that the petitioner had never approached the Municipal Corporation for allotment of the work was of no consequence in determining the legality of the impugned allotment. The Court held,

“The petitioner cannot be deprived of the right to challenge an arbitrary exercise of public power merely on the ground that it had not made any prior representation to the authorities, particularly when the grievance raised is that the official respondents have failed to adopt a transparent and competitive procedure for awarding a public contract.”

The Court observed that the respondents had failed to establish any exceptional circumstance or compelling reason which could justify departure from the normal rule of public tender, and that the action of the official respondents suffered from arbitrariness and was violative of Article 14 of the Constitution.

Accordingly, the Court quashed the allotment order and directed the respondents to undertake the process of allotment afresh, in accordance with law, by inviting tenders in open competition.