Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 1871-1872 OF 2014

Special Leave Petition (C) Nos. 17673-17674 OF 2012

SANJAY KUMAR SHUKLA ... APPELLANT (S)

VERSUS

M/S BHARAT PETROLEUM ... RESPONDENT (S)

CORPORATION LTD. & ORS.

J U D G M E N T

RANJAN GOGOI, J.

1.Leave granted.

2. These appeals are directed against the common

judgment and order dated 16.05.2012 passed by the High

Court of Judicature at Patna in Letters Patent Appeal

Nos.1845 and 1916 of 2011. By the aforesaid impugned

order, the High Court has directed that the respondent No.7

herein who was placed at serial No.2 of the select list/merit

panel for award of dealership of retail outlet under the

1

Page 2 respondent No.1, i.e. M/s. Bharat Petroleum Corporation

Ltd., be offered the said dealership after completing the

process contemplated under the selection procedure in force

in the Corporation.

3.A summary of the essential facts is delineated

hereinbelow:-

The first respondent Corporation issued an

advertisement dated 30.05.2010 for award of dealership of

retail outlets in different locations including Areraj, East

Champaran District in the State of Bihar. The selection was

to be made in accordance with the norms laid down by the

Corporation and available in a booklet published on

15.09.2008 under the caption “procedure for selection of

petrol/diesel retail outlet dealers” (hereinafter referred to as

the “Norms”). On the basis of the applications received for

grant of the dealership in question, a selection was held

wherein the appellant was placed at Sl.No.1 with 78.04

marks whereas the respondent No.7 who had secured 77.75

marks was placed at Sl.No.2. The dealership was to be

offered to the most meritorious candidate after necessary

2

Page 3 field verification. The norms contemplated issuance of a

Letter of Intent (LoI) on the expiry of 30 days from the date

of publication of the select list/merit panel or till disposal of

complaints, if any, with regard to the selection made by the

Corporation. A grievance redressal mechanism is expressly

laid down in the ‘Norms’.

4.Aggrieved by the selection, the respondent No.7 filed a

complaint dated 25.01.2011 before the Corporation raising a

two-fold grievance. The first was with regard to award of

‘zero’ marks to the Respondent, against a maximum of ‘four’

awardable under the head “Fixed and Moveable Assets”.

The second grievance raised was that the land offered by

the appellant was under litigation and was not immediately

available for use of the retail outlet. The complaint filed by

the respondent No.7 was promptly answered by an order of

rejection dated 28.01.2011 on the ground that the Technical

Evaluation Committee in its report had found the land

offered by the appellant suitable for development of the

retail outlet and that the issue raised by the respondent in

the objection/complaint would be dealt with in the process of

grant of No Objection Certificate (NOC) by the District

3

Page 4 Magistrate to whom a reference of the matter is required to

be made. In so far as the claim of the respondent No.7 with

regard to award of marks is concerned, the same was

rejected on the ground that the respondent had not

furnished any document in support of his title to the assets

mentioned by him in his application.

5.Aggrieved by the rejection of his complaint, the

respondent No.7 moved the High Court by means of a writ

petition registered and numbered as C.W.J.C. No.6125 of

2011. No Letter of Intent had been granted to the appellant

at that stage. A learned Single Judge of the High Court by

order dated 29.09.2011 took the view that in so far as award

of marks to the respondent No.7 is concerned no fault can be

found in the decision of the Corporation inasmuch as the

respondent No.7 did not produce any document of title in

respect of assets mentioned by him in his application for the

dealership. In fact, the learned Single Judge came to the

further conclusion that such failure on the part of the

respondent No.7 amounted to suppression/concealment of

relevant facts. In so far as the present appellant is

concerned, the learned Single Judge came to the conclusion

4

Page 5 that the requisite NOC from the District Magistrate in respect

of the land offered by the appellant not having been

granted, the Corporation cannot be expected to wait

indefinitely. Consequently, the learned Single Judge directed

that the selection process be redone.

6. Aggrieved by the order dated 29.09.2011 passed by the

learned Single Judge both the appellant and the respondent

No.7 filed their respective Letters Patent Appeals. The

Division Bench of the High Court by the impugned order

dated 16.05.2012 substantially agreed with the findings

recorded by the learned Single Judge in so far as both the

parties are concerned. However, taking note of Clause 16 of

the Norms i.e. “Procedure For Selection Of Petrol/Diesel

Retail Outlet Dealers”, the Bench took the view that once the

appellant was found to be disentitled, the dealership should

have been awarded to respondent No.7, he being, at serial

No.2 of the merit list. Consequential directions were issued

by the Division Bench of the High Court. Aggrieved, the

present appeals have been filed.

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Page 6 7.Contending that the findings of the learned Single Judge

with regard to suppression/concealment had not been set

aside by the Division Bench of the High Court in its order

dated 16.05.2012, the respondent No.7 had moved SLP (C)

No.28324 of 2012 against the aforesaid part of the order

dated 16.05.2012. The SLP filed by the respondent No.7 was

dismissed by this Court by order dated 05.10.2012.

8.An effective resolution of the contentious issues that

have emerged from the arguments made on behalf of the

rival parties would require specific notice of the relevant

documents brought on record by the parties at different

stages of the proceedings before the High Court as well as

this Court. As none of the said documents are disputed and

the authenticity/genuineness thereof is not questioned,

considering the relevance of the same to the subject matter,

we are of the view that the facts unfolded by the said

documents can be ignored only at the cost of a fair

adjudication of the lis between the parties. We, therefore,

proceed to take note of the said facts in proper sequential

order.

6

Page 7 9.After the selection for the dealership was finalized by

the Corporation on 30.12.2010, a reference was made to the

District Authority on 24.01.2011 for grant of NOC to enable

the Corporation to apply for the necessary licence under the

Petroleum Rules, 2002. By communications dated

11.07.2011 and 16.07.2011 the District Authority informed

the Corporation that NOC cannot be granted on account of

the fact that the land, on which outlet was proposed, was

involved in Partition Suit No.7 of 2006. It would be of some

significance that the appellant was impleaded as defendant

in the said suit on 04.02.2011 i.e. after 5 years of its

institution and that too after the finalization of the select

list/merit panel by the Corporation. An order of injunction to

restrain the District Authority from issuing NOC was sought

by the plaintiff in Partition Suit No.7 of 2006 which was

refused by the learned Trial Court on 19.07.2011. Taking

note of the aforesaid fact i.e. refusal of injunction, the

District Authority, once again, sought for a report from the

Sub-Divisional Officer whether NOC can be granted. This was

on 04.08.2011. The Sub-Divisional Officer sought the

opinion of the Government Advocate and submitted a report

7

Page 8 dated 18.08.2011 recommending grant of NOC. These

documents, though vital, were not before the High Court but

have been placed before us. After the learned Single Judge

had decided the writ petition by ordering a fresh selection,

an amendment application dated 17.10.2011 was filed in

Partition Suit No.7 of 2006 for deletion of the land offered for

the dealership from the purview of the suit. The said

amendment was allowed by the learned Trial Court on

19.10.2011. In the L.P.A. filed by the appellant, i.e. L.P.A.

No.1845 of 2011 the amendment application for deletion of

the land in question as well as the order dated 19.10.2011 of

the learned Trial Court allowing the said amendment

application were enclosed. The High Court overlooked the

same and did not consider the effect thereof on the rights

and entitlements of the respective parties. It also appears

that on 26.12.2011, on behalf of the Corporation, a reminder

was issued to the District Authority for grant of the NOC

applied for by the Corporation on 24.01.2011. There is

another letter on record dated 30.12.2011 from the District

Magistrate to the Territory Manager (Retail) Bharat

Petroleum Corporation Limited in the matter of grant of NOC.

8

Page 9 In the said letter reference has been made to the order of

the learned Single Judge in the C.W.J.C. No.6125 of 2011

dated 29.09.2011. In the ultimate paragraph of the said

letter it is stated that:-

“Thus, in view of the present context, kindly

inform about your final decision regarding

issuance of NOC whether issuance of NOC can be

considered or not.”

The aforesaid letter dated 30.12.2011 is an English

translation of the original. The contents of the last

paragraph quoted hereinabove has left the true meaning

thereof clouded though the appellant contends that the said

paragraph should be read as containing a query from the

Corporation as to whether in view of the learned Single

Judge’s order passed in the writ petition, NOC can be issued

or not. Be that as it may, another suit i.e. T.S.No.638 of

2011 involving land in question had been instituted though

the same has been dismissed on 6.1.2014 as not

maintainable. Above all, Partition Suit No.7 of 2006 has

been dismissed as withdrawn on 7.1.2014 on an application

filed by the plaintiff. No other pending litigation involving

the land has been brought to the notice of the Court.

9

Page 10 10. In the present case even before the Letter of Intent in

respect of the dealership could be issued to the appellant

the proposed grant came to be challenged before the High

Court by the respondent No.7 who had impugned the

decision of the Corporation dated 28.01.2011 rejecting the

complaint filed by him against the selection made. Initially,

the District Authority had taken the stand that the NOC in

respect of the land offered by the appellant cannot be issued

as the same was found to be involved in a litigation i.e.

Partition Suit No.7 of 2006. While the writ petition was

pending there was a change in the stand of the District

Authority in the matter of grant of NOC. Yet, the same was

not brought to the notice of the learned Single Judge. A vital

fact, therefore, escaped notice. The fact that the appellant

was impleaded in the suit on 04.02.2011, i.e. nearly 5 years

after the institution thereof and after the selection was

finalized by the Corporation on 30.12.2010 was before the

High Court; yet the same had been overlooked by the

learned Single Judge. The Division Bench hearing the Letters

Patent Appeals also overlooked the fact that the learned

10

Page 11 Trial Court by order dated 19.10.2011 had allowed the

deletion of the land in question from the purview of the said

partition suit on an application filed by the plaintiff. This is,

notwithstanding, the fact that the amendment application

dated 17.10.2011 as well as the order thereon dated

19.10.2011 was brought on the record of the L.P.A. by the

appellant. That apart, the facts brought on record of the

present appeal by the parties is of considerable significance.

The subsequent report of the Sub-Divisional Officer dated

18.8.2011 recommending grant of NOC; the reminder of the

Corporation dated 26.12.2011 to the District Authority for

grant of NOC; the institution of Title Suit No.638 of 2011 in

respect of the land in question and the dismissal thereof by

order dated 06.01.2014 on the ground of maintainability as

well as the dismissal of Partition Suit No.7 of 2006 on

07.01.2014 (on withdrawal) are too significant to be ignored,

as already held. Relevant facts have been ignored at

different stages of consideration of the matter by the High

Court and in the light of the totality of the facts now placed

before us, we unhesitatingly come to the conclusion that in

the present case there was a deliberate and not very bona

11

Page 12 fide attempt on the part of the respondent No.7 to deny the

fruit of the selection

made in favour of the appellant by the Corporation as far

back as on 30.12.2010. The situation, therefore, has to be

remedied and it is the precise manner thereof which must

now engage the attention of the Court.

11.We cannot help observing that in the present case

exercise of the extraordinary jurisdiction vested in the High

Court by Article 226 of the Constitution has been with a

somewhat free hand oblivious of the note of caution struck

by this Court with regard to such exercise, particularly, in

contractual matters. The present, therefore, may be an

appropriate occasion to recall some of the observations of

this Court in the above context. In Raunaq International

Ltd. Vs. I.V.R. Construction Ltd. & Ors.

1

, (paragraphs 9,

10 and 11) this Court had held as follows :-

“9. The award of a contract, whether it is by a

private party or by a public body or the State, is

essentially a commercial transaction. In arriving at

a commercial decision, considerations which are of

paramount importance are commercial

considerations. These would be:

1

(1999) 1 SCC 492

12

Page 13 (1) the price at which the other side is willing

to do the work;

(2) whether the goods or services offered are

of the requisite specifications;

(3) whether the person tendering has the

ability to deliver the goods or services as per

specifications. When large works contracts

involving engagement of substantial

manpower or requiring specific skills are to

be offered, the financial ability of the

tenderer to fulfil the requirements of the job

is also important;

(4) the ability of the tenderer to deliver goods

or services or to do the work of the requisite

standard and quality;

(5) past experience of the tenderer and

whether he has successfully completed

similar work earlier;

(6) time which will be taken to deliver the

goods or services; and often

(7) the ability of the tenderer to take follow-

up action, rectify defects or to give post-

contract services.

Even when the State or a public body enters into a

commercial transaction, considerations which

would prevail in its decision to award the contract

to a given party would be the same. However,

because the State or a public body or an agency of

the State enters into such a contract, there could

be, in a given case, an element of public law or

public interest involved even in such a commercial

transaction.

10. What are these elements of public interest?

(1) Public money would be expended for the

purposes of the contract. (2) The goods or services

13

Page 14 which are being commissioned could be for a

public purpose, such as, construction of roads,

public buildings, power plants or other public

utilities. (3) The public would be directly interested

in the timely fulfilment of the contract so that the

services become available to the public

expeditiously. (4) The public would also be

interested in the quality of the work undertaken or

goods supplied by the tenderer. Poor quality of

work or goods can lead to tremendous public

hardship and substantial financial outlay either in

correcting mistakes or in rectifying defects or even

at times in redoing the entire work — thus

involving larger outlays of public money and

delaying the availability of services, facilities or

goods, e.g., a delay in commissioning a power

project, as in the present case, could lead to

power shortages, retardation of industrial

development, hardship to the general public and

substantial cost escalation.

11. When a writ petition is filed in the High Court

challenging the award of a contract by a public

authority or the State, the court must be satisfied

that there is some element of public interest

involved in entertaining such a petition. If, for

example, the dispute is purely between two

tenderers, the court must be very careful to see if

there is any element of public interest involved in

the litigation. A mere difference in the prices

offered by the two tenderers may or may not be

decisive in deciding whether any public interest is

involved in intervening in such a commercial

transaction. It is important to bear in mind that by

court intervention, the proposed project may be

considerably delayed thus escalating the cost far

more than any saving which the court would

ultimately effect in public money by deciding the

dispute in favour of one tenderer or the other

tenderer. Therefore, unless the court is satisfied

that there is a substantial amount of public

14

Page 15 interest, or the transaction is entered into mala

fide, the court should not intervene under Article

226 in disputes between two rival tenderers.”

12.In Air India Ltd. Vs. Cochin International Airport

Ltd. & Ors.

2

, there was a further reiteration of the said

principle in the following terms:-

“7. The law relating to award of a contract by the

State, its corporations and bodies acting as

instrumentalities and agencies of the Government

has been settled by the decision of this Court in

Ramana Dayaram Shetty v. International Airport

Authority of India

3

, Fertilizer Corpn. Kamgar Union

(Regd.) v. Union of India

4

, CCE v. Dunlop India

Ltd.

5

, Tata Cellular v. Union of India

6

, Ramniklal N.

Bhutta v. State of Maharashtra

7

and Raunaq

International Ltd. v. I.V.R. Construction Ltd.

8

The

award of a contract, whether it is by a private

party or by a public body or the State, is

essentially a commercial transaction. In arriving at

a commercial decision considerations which are

paramount are commercial considerations. The

State can choose its own method to arrive at a

decision. It can fix its own terms of invitation to

tender and that is not open to judicial scrutiny. It

can enter into negotiations before finally deciding

to accept one of the offers made to it. Price need

not always be the sole criterion for awarding a

contract. It is free to grant any relaxation, for bona

fide reasons, if the tender conditions permit such a

relaxation. It may not accept the offer even

though it happens to be the highest or the lowest.

2

(2000) 2 SCC 617

3

(1979) 3 SCC 489

4

(1981) 1 SCC 568

5

(1985) 1 SCC 260

6

(1994) 6 SCC 651

7

(1997) 1 SCC 134

8

(1999) 1 SCC 492

15

Page 16 But the State, its corporations, instrumentalities

and agencies are bound to adhere to the norms,

standards and procedures laid down by them and

cannot depart from them arbitrarily. Though that

decision is not amenable to judicial review, the

court can examine the decision-making process

and interfere if it is found vitiated by mala fides,

unreasonableness and arbitrariness. The State, its

corporations, instrumentalities and agencies have

the public duty to be fair to all concerned. Even

when some defect is found in the decision-making

process the court must exercise its discretionary

power under Article 226 with great caution and

should exercise it only in furtherance of public

interest and not merely on the making out of a

legal point. The court should always keep the

larger public interest in mind in order to decide

whether its intervention is called for or not. Only

when it comes to a conclusion that overwhelming

public interest requires interference, the court

should intervene.”

(Emphasis is ours)

13.Similar reiteration is to be found in Master Marine

Services (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd. &

Anr.

9

; Tejas Constructions and Infrastructure Private

Limited Vs. Municipal Council, Sendhwa and Another

10

and several other pronouncements reference to which would

only be repetitive and, therefore, is best avoided.

14.We have felt it necessary to reiterate the need of

caution sounded by this Court in the decisions referred to

9

(2005) 6 SCC 138

10

(2012) 6 SCC 464

16

Page 17 hereinabove in view of the serious consequences that the

entertainment of a writ petition in contractual matters,

unless justified by public interest, can entail. Delay in the

judicial process that seems to have become inevitable could

work in different ways. Deprivation of the benefit of a

service or facility to the public; escalating costs burdening

the public exchequer and abandonment of half completed

works and projects due to the ground realities in a fast

changing economic/market scenario are some of the pitfalls

that may occur.

15.In the present case, fortunately, the litigation has not

been very time consuming. Nothing has been suggested on

behalf of the Corporation that the establishment of a retail

outlet at Areraj, East Champaran District in the State of Bihar

is not required as on date. It can, therefore, be safely

understood that in the instant case the public of the locality

have been deprived of the benefit of the service that the

outlet could have generated. We have already indicated

that the present litigation initiated by Respondent No. 7 does

not constitute a very bonafide exercise on the part of the

said Respondent and the entire litigation appears to have

17

Page 18 been driven by desire to deny the fruits of the selection in

which the appellant was found to be the most eligible

candidate. Whether the outlet is operated by the appellant

or the Respondent No. 7 is of no consequence to the

ultimate beneficiaries of the service to be offered by the said

outlet. The above highlights the need of caution that was

imperative on the part of the High Court while entertaining

the writ petition and in passing orders therein. Be that as it

may, in the totality of the facts of the present case, we are of

the view that it would be just and proper to direct the

Corporation, if it is of the view that the operation of the retail

outlet is still justified by the exigencies, to award the same

to the appellant by completing the requisite formalities in

accordance with the procedure laid down by the Corporation

itself.

16. Consequently, these appeals are allowed and the

impugned order dated 16.05.2012 passed by the Division

Bench of the High Court in L.P.A. Nos.1845 and 1916 of 2011

as well as the order dated 29.09.2011 passed by learned

Single Judge in C.W.J.C. No.6125 of 2011 are set aside.

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Page 19 ...…………………………CJI.

[P. SATHASIVAM]

.........………………………

J.

NEW DELHI, [RANJAN GOGOI]

FEBRUARY 07, 2014.

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